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Lotfi Heravi

Bio: Lotfi Heravi is an academic researcher. The author has contributed to research in topics: Cointegration & Price index. The author has an hindex of 1, co-authored 1 publications receiving 11 citations.

Papers
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Dissertation
01 Jan 2015
TL;DR: In this article, the authors show that lower volatility of real oil price in local currency causes lower volatility in government expenditure and fiscal balance as a share of GDP in Middle East oil exporting countries.
Abstract: The aim of this thesis is three-fold. First, in contrast to developed exporting countries such as Australia, New Zealand and Canada, Middle East oil exporting countries are years behind achieving the prerequisites for floating exchange rate and Inflation Targeting monetary regime. On the other hand, their performance under fixed exchange rate (to the US dollar) has brought them some painful experience such as the Dutch Disease and high inflation. For a sample of five of these countries -- Qatar, Oman, Kuwait, Saudi Arabia and the UAE -- we conduct a set of counterfactual experiments. We empirically simulate government consumption expenditure, under a hypothetical peg to a nominal anchor (oil price in either the radical or moderate version) or to a basket (containing the US Dollar, Yen and the Euro) and compare this simulation with whatever exchange rate regime each country actually followed. We find that lower volatility of real oil price in local currency causes lower volatility in government expenditure and fiscal balance as a share of GDP. Hence, we face a less volatile economy. Second, we determine the equilibrium exchange rate (using BEER) of these five oil exporting countries in the Persian Gulf which depend heavily on exports of oil, natural gas and oil products. We employ a new data set for the real effective exchange rate of these countries which is updated annually and covers the period from 1980 to 2011. Given the limited length of the sample (32 years) and low power of individual country by country tests for unit root and cointegration, estimating separate equations for each country (time series) does not provide us with precise results; therefore, to increase the efficiency of the estimators, we employ panel analysis. We apply the pooled mean-group (PMG) of Pesaran et al. (1999) and four more panel estimators for a robustness check. All estimators strongly support the positive effect of real oil price on the real effective exchange rate (i.e. higher real oil price leads to appreciation of the real effective exchange rate) which is consistent with theoretical predictions and with previous studies for commodity (oil) exporting countries. The productivity deferential elasticity is 0.10 which is consistent with the results of the related literature such as the studies of MacDonald and Ricci (2004) for South Africa, and of Lee et al. (2008) for 48 countries over 1980-2004. The BEERs of Qatar, Kuwait and (to some extent) the UAE follow their real effective exchange rates. From 2000, with the increase in oil price, the BEERs appreciate while the real exchange rate of Oman and Saudi Arabia decline; therefore, the Saudi Arabian and Omani currencies get undervalued. Third, employing a new data set of Canadian commodity price indices, we revisit the Canada Bank Equation and introduce a new version with more fundamentals. We present a similar equation for Australia as one of the other developed commodity exporting countries. Using cointegration and the first differences analysis between real exchange rate and fundamentals, we investigate the SVECM and SVAR frameworks to decompose the variance of real exchange rate of Canada and Australia. In the SVECM analysis, the productivity differential and commodity price are the main contributor to the variance of the real exchange rates of Australia and Canada. For the SVAR analysis, we confirm that, as in the literature, demand shock is the dominant force in explaining the variance of real exchange rates of both countries. This result does not change even by adding the commodity price shock to the SVAR framework.

11 citations


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Journal ArticleDOI
TL;DR: The condition of rural populations in much of the global South is indeed dire-most of the 1 billion people living on less than a dollar a day live in the countryside as mentioned in this paper.
Abstract: too fine for undergraduate readers who are new to agrarian debates. On the whole, however, the book is accessible and deserves to be widely read. The condition of rural populations in much of the global South is indeed dire-most of the 1 billion people living on less than a dollar a day live in the countryside. This book offers many important insights into why this is the case, and how the current regime of global capitalism works against a repetition of the agrarian transition that brought wealth and security to the global North.

596 citations

Posted Content
TL;DR: This paper found that for developing countries with little exposure to international capital markets, pegs are notable for their durability and relatively low inflation, while floats are distinctly more durable and also appear to be associated with higher growth.
Abstract: Drawing on new data and advances in exchange rate regimes' classification, we find that countries appear to benefit by having increasingly flexible exchange rate systems as they become richer and more financially developed. For developing countries with little exposure to international capital markets, pegs are notable for their durability and relatively low inflation. In contrast, for advanced economies, floats are distinctly more durable and also appear to be associated with higher growth. For emerging markets, our results parallel the Baxter and Stockman classic exchange regime neutrality result, though pegs are the least durable and expose countries to higher risk of crisis.

258 citations

Posted Content
TL;DR: This paper investigated whether business cycles are different according to the exchange rate regime and found evidence for some aggregates that their business cycle behavior has changed and then tried to replicate this change with an international real business cycle model with exchange rate shocks.
Abstract: Are business cycles different according to the exchange rate regime? Baxter & Stockman have inconclusive results We reinvestigate this question with more recent data and a different methodology and find evidence, for some aggregates, that their business cycle behavior has changed We then try to replicate this change with an international real business cycle model with exchange rate shocks

112 citations