Incentive Policies and Manufactures Exports in North Africa.

This paper empirically assesses the impact of exchange rate policy on the performance of manufactured exports for four North African countries over the 1970-92 period. The impact of exchange rate policy is examined through the effect of three indicators: real effective exchange rate (RER) changes, RER volatility, and (model-based measures of) RER misalignment. Export supply equations are estimated for three manufacturing sectors (textiles, chemicals, and food). Our results suggest that exchange rate management matters for export performance. This is evidenced both by the significant impact of changes in the real effective exchange rate and by the negative influence exerted independently by real exchange rate misalignment and volatility.