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The Impact of Central Bank Monetary Policy Transparency on Cyclical Exchange Rate Volatility in the MENA Region

Document Type : Original Article

Authors
1 Assistant Professor, Department of Economics, Payame Noor University, Tehran, Iran
2 Master’s Graduate in Economics
Abstract
This study examines the impact of budget deficits and central bank monetary policy transparency on cyclical exchange rate volatility in selected MENA countries (Iran, Qatar, Saudi Arabia, UAE, Kuwait, Oman, Bahrain, Jordan, Lebanon, Egypt, Tunisia, Algeria). Annual data from 2010 to 2022 were analyzed using the Quantile Wavelet model. This method is chosen for its ability to assess exchange rate fluctuations across short-, medium-, and long-term horizons and at various quantiles. Results indicate that greater monetary policy transparency significantly reduces cyclical exchange rate volatility, while budget deficits tend to amplify it, with effects varying across quantiles and time scales. Policymakers are advised to enhance transparency and manage deficits to stabilize exchange rates. The findings offer valuable insights for policy and future research.
 
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Volume 23, Issue 131 - Serial Number 131
May and June 2025
Pages 65-82

  • Receive Date 11 January 2025
  • Revise Date 08 April 2025
  • Accept Date 14 April 2025