Adapting Monetary Policy to New Challenges After the Tunisian Revolution: Implications for Economic Growth

This objective of this paper is to analyze the impact of monetary policy on economic growth in Tunisian. After a revolution or significant political changes, countries may reassess and adjust their economic policies, including monetary policy, to address new challenges and align with the evolving economic and political landscape. Central banks often play a crucial role in maintaining economic stability, and changes in leadership or government can lead to shifts in monetary policy objectives and strategies. Using an ARDL model applied to monthly data over the 2011/2021 period, the results revealed that money supply has a positive long-run impact on economic growth in Tunisian after revolution. On the other hand; other instruments such as the interest rate, exchange rate have a significant negative relationship with economic growth. In fact, when interest rates are high, it becomes more expensive to borrow money, so people and businesses are less likely to invest and spend. Findings also depict that increase in Domestic Credit to Private Sector hurts the economic growth. A negative effect on domestic credit could lead a central bank to consider lowering interest rates or implementing other measures to stimulate credit growth and support economic activity. Besides, inflation was shown to play an indirect role by increasing the impact of economic growth. Due to the effect of the revolution, the political instability and high international food and fuel prices negatively affected the domestic prices; Tunisia reached an inflation rate of 4.8% in 2021. Findings of the study have important implications that may discuss the need to adapt monetary policy to ensure economic stability in the aftermath of the Tunisian revolution. This could involve addressing challenges such as inflation, exchange rate fluctuations, and overall economic uncertainty. There might be recommendations for adjustments to monetary policy tools and strategies. This could include changes in interest rates, currency management, and liquidity measures to support economic recovery and growth. The implications might involve collaboration between monetary authorities and the government to implement coordinated fiscal and monetary policies. This synergy is often necessary to address broader economic challenges and promote sustainable growth.