Abstract
•In this paper, we assess the symmetric and asymmetric effects of changes in the effective value of dinar on Tunisia’s trade balance with the rest of the world.•We disaggregate Tunisia’s trade by sectors.•We find that dinar depreciation will benefit Food, Wood and Papers, Steel, and Electronic sectors.•We also find that dinar appreciation will hurt Energy, Food, Wood and Paper, Mechanical, and Electronic sectors.
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.