Currency misalignments and growth
The aim of this paper is to investigate the link between currency misalignments and economic growth. Relying on panel cointegration techniques, we calculate real exchange rate (RER) misalignments as deviations of actual RERs from their equilibrium values for a set of advanced and emerging economies....
| Authors: | , , |
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| Format: | article |
| Publication Date: | 2011 |
| Country: | España |
| Institution: | Universitat Autònoma de Barcelona |
| Repository: | Dipòsit Digital de Documents de la UAB |
| Language: | English |
| OAI Identifier: | oai:ddd.uab.cat:324212 |
| Online Access: | https://ddd.uab.cat/record/324212 https://dx.doi.org/urn:doi:10.1080/00036846.2011.577022 |
| Access Level: | Open access |
| Keyword: | Growth Exchange rate misalignments Nonlearity PSTR models |
| Summary: | The aim of this paper is to investigate the link between currency misalignments and economic growth. Relying on panel cointegration techniques, we calculate real exchange rate (RER) misalignments as deviations of actual RERs from their equilibrium values for a set of advanced and emerging economies. Estimating panel smooth transition regression models, we show that RER misalignments have a differentiated impact on economic growth depending on their sign: whereas overvaluations negatively affect economic growth, real exchange rate undervaluations significantly enhance it. This result indicates that undervaluations may drive the exchange rate to a level that encourages exports and promotes growth. |
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