The Impact of Inflation and Exchange Rate Volatility on Economic Growth: Evidence from ARDL Model for Tunisia

In recent years, mainly during the Covid 19 period, many studies have demonstrated the existence of a causal relationship between economic growth and these main determinants. This article seeks to examine the short and long term relationships between economic growth, inflation, trade balance, real exchange rates, income and money supply in the case of Tunisia. Using the testing approach related to cointegration and error correction models, developed in an autoregressive distributed lag (ARDL) framework, we examine whether there is a long-run equilibrium relationship between the economics growth and the determinants. Using this approach, we find evidence of a long-term relationship between GDP economic growth, money supply, inflation and the real exchange rate. The limit testing approach of cointegration and error correction models, developed in an autoregressive distributed lag (ARDL) is applied to annual data for the period 1990 to 2021 in order to examine whether there is a long-term equilibrium relationship between economic growth and the main macroeconomic variables. The result of the limit test indicates that there is a long-term two-way causal relationship between economic growth, inflation, money supply, money market rate. The estimated results show that the model variables are positively related in the long and short term.