On the link between real effective value of Tunisia’s Dinar and its sectoral trade with the rest of the world: New evidence from asymmetry analysis

Abstract

Application of the linear ARDL approach to the aggregate trade balance of Tunisia with the rest of the world reveals no significant relation between the trade balance and real effective exchange rate of dinar. However, the nonlinear ARDL approach reveals that while dinar depreciation will improve the trade balance of Tunisia, dinar appreciation will have no effect, a strong sign of asymmetric effects. Disaggregation by sectors and application of both approaches reveal that while dinar depreciation will benefit Food, Wood and Papers, Steel, and Electronic sectors, dinar appreciation will hurt Energy, Food, Wood and Paper, Mechanical, and Electronic sectors, all in an asymmetric manner. We also found that dinar appreciation will benefit two small sectors, Steel and Nonferrous Metals.