Arab Monetary Fund: Arab countries must ensure harmonization of economic policy options

Al-Anbat - Saba Al-Sukar

Translated by - Majdooleen Sarrar

The Arab Monetary Fund (AMF) released a study entitled "Testing the Effectiveness of the Economic Policy Dilemma", the results of which found that countries with a stable exchange regime, free movement of capital, and lack of monetary independence are likely to fare better compared to other countries, and that capital movement usually boosts GDP growth compared to countries that impose capital movement restrictions.

The study developed a new methodology to interpret the Mundell-Fleming model based on formal variables, with the aim of obtaining different scenarios and testing their impact on changes in the size of real GDP and verifying whether these scenarios are compatible with the theory.Among these scenarios is that of Mundell-Fleming, which suggests that the free movement of capital, the independence of monetary policy, and the fixed exchange rate are difficult to combine in one economy, and therefore the study assumes that other scenarios can have a positive impact on economic performance taking into account the structural composition of the state. And to perform these tests.

To conduct these tests, the study followed a standard model based on the least squares method using the data of 17 Arab countries exporting and importing goods using data for 17 Arab countries during the period from 1970 to 2021.

The study aimed to analyze economic policies related to capital movement controls, monetary policy frameworks, exchange rate arrangements, and the impact of those economic policies on economic growth.