The impact of the exchange rate systems on macroeconomic indicators: an evaluation study on Sudan experience 1970–2019)

Abstract

This study followed both descriptive and correlation approaches to evaluate the impact of the application of the exchange rate systems on Sudan’s macroeconomic indicators from 1970 to 2019. During the 1970s, Sudan adopted the system of fixing exchange rates, and the “managed exchange rate” with the successive devaluation of the local currency during 1980s. During 1990s, the floating and liberalization policy of the exchange rate had been adopted beside the system of the crawling peg between 1997 and 1999. During the first decade of the millennium (i.e., the period of the flow of the oil revenues), Sudan followed a managed exchange rate system and during the second decade (the period of the extreme scarcity of foreign exchange resources after the secession of the southern Sudan). This study concluded that the systems of the fixing exchange rate, the crawling peg and the systems managing exchange rate that are closer to fixing positively supported the macroeconomic indicators, while the systems of exchange rate that are closer to liberalization, floating and flexibility negatively affected the exports, imports gross domestic product (GDP), personal income, and increasing the inflation rate. One of the most important recommendations of this study is the need to adopt a system of the exchange rate that is closer to fixing to ensure the improvement of the macroeconomic indicators.