Exchange Rate Misalignment and Growth: Old and New Econometric Evidence
AbstractSeveral studies have tried to identify the relationship between growth and misaligned or overvalued currencies. Many works (Easterly (2001) and Fajnzylber et alii (2002)), find negative correlations between exchange rate misalignment and growth for a long list of developing countries since the seventies; the more overvalued the currency, the smaller the per capita growth rates. Even after controlling the regressions for several types of variables, the studies cannot reject the statistical significance of overvalued exchange rates in explaining growth. This paper presents new econometric evidence for the exchange rate levels and growth relation based on a panel data study for 58 developing countries from 1960 until 1999 using PPP deviation measures. Our main contribution here is to estimate growth regressions with a real exchange rate index that deals with changes in real GDP per capita levels. We use a new overvaluation index that takes into account variations in real per capita incomes, adjusting, thus, our exchange rate estimates for the so-called Balassa-Samuelson effect. By correcting traditional real exchange rate annual estimates for GDP per capita increases, we intend to control our whole series for appreciations due to productivity increases as many authors do for some specific years.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics] in its journal Economia.
Volume (Year): 7 (2006)
Issue (Month): 4 ()
Contact details of provider:
Postal: Secretaria da ANPEC Rua Tiradentes, 17 - Ingá Niterói, RJ 24210-510 Brazil
Web page: http://www.anpec.org.br/
More information through EDIRC
Postal: Secretaria da ANPEC Rua Tiradentes, 17 - Ingá Niterói, RJ 24210-510 Brazil
Other versions of this item:
- Paulo Gala & Claudio R. Lucinda, 2006. "Exchange Rate Misalignment And Growth: Old And New Econometric Evidence," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 93, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bond, Stephen Roy & Hoeffler, Anke & Temple, Jonathan, 2001.
"GMM Estimation of Empirical Growth Models,"
CEPR Discussion Papers
3048, C.E.P.R. Discussion Papers.
- Stanley Fischer, 1993.
"The Role of Macroeconomic Factors in Growth,"
NBER Working Papers
4565, National Bureau of Economic Research, Inc.
- Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- Ong, Li Lian, 1997. "Burgernomics: the economics of the Big Mac standard," Journal of International Money and Finance, Elsevier, vol. 16(6), pages 865-878, December.
- Mark P. Taylor, 1995. "The Economics of Exchange Rates," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 13-47, March.
- Ofair Razin & Susan M. Collins, 1997. "Real Exchange Rate Misalignments and Growth," NBER Working Papers 6174, National Bureau of Economic Research, Inc.
- Polterovich, Victor & Popov, Vladimir, 2003. "Accumulation of Foreign Exchange Reserves and Long Term Growth," MPRA Paper 20069, University Library of Munich, Germany.
- Acemoglu, Daron & Johnson, Simon & Robinson, James & Thaicharoen, Yunyong, 2003.
"Institutional causes, macroeconomic symptoms: volatility, crises and growth,"
Journal of Monetary Economics,
Elsevier, vol. 50(1), pages 49-123, January.
- Acemoglu, Daron & Johnson, Simon & Robinson, James A & Thaicharoen, Yunyong, 2002. "Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth," CEPR Discussion Papers 3575, C.E.P.R. Discussion Papers.
- Daron Acemoglu & Simon Johnson & James Robinson & Yunyong Thaicharoen, 2002. "Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth," NBER Working Papers 9124, National Bureau of Economic Research, Inc.
- Rodrik, Dani, 2005.
Handbook of Economic Growth,
in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 14, pages 967-1014
- Dani Rodrick, 2003. "Growth Strategies," Economics working papers 2003-17, Department of Economics, Johannes Kepler University Linz, Austria.
- Dani Rodrik, 2003. "Growth Strategies," NBER Working Papers 10050, National Bureau of Economic Research, Inc.
- Rodrik, Dani, 2003. "Growth Strategies," CEPR Discussion Papers 4100, C.E.P.R. Discussion Papers.
- Ofair Razin & Susan M. Collins, 1997. "Real Exchange Rate Misalignments and Growth," International Finance 9707001, EconWPA.
- Luiz Carlos Bresser-Pereira, 2002. "Brazil's Quasi-Stagnation and the Growth cum Foreign Savings Strategy," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 32(4), pages 76-102, January.
- Michael P Dooley & David Folkerts-Landau & Peter Garber, 2006.
"Interest rates, exchange rates and international adjustment,"
Conference Series ; [Proceedings],
Federal Reserve Bank of Boston, vol. 51.
- Michael P. Dooley & David Folkerts-Landau & Peter M. Garber, 2005. "Interest Rates, Exchange Rates and International Adjustment," NBER Working Papers 11771, National Bureau of Economic Research, Inc.
- Atish R. Ghosh & Anne-Marie Gulde & Holger C. Wolf, 2003. "Exchange Rate Regimes: Choices and Consequences," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262072408, December.
- Roberto FRENKEL, 2004. "Real exchange rate and employment in Argentina, Brazil, Chile and Mexico," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 19(223), pages 29-52.
- Ghura, Dhaneshwar & Grennes, Thomas J., 1993. "The real exchange rate and macroeconomic performance in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 42(1), pages 155-174, October.
- Aderbal Oliveira Damasceno & Flávio Vilela Vieir, 2014. "Desalinhamento Cambial, Volatilidade Cambial E Crescimento Econômico: Uma Análise Para A Economia Brasileira (1995-2011)," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41th Brazilian Economics Meeting] 100, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
- Carl Grekou, 2014. "Revisiting the nexus between currency misalignments and growth in the CFA Zone," EconomiX Working Papers 2014-4, University of Paris West - Nanterre la Défense, EconomiX.
- Camelia Minoiu & Patrick A. Imam, 2008. "Mauritius," IMF Working Papers 08/212, International Monetary Fund.
- Marcel SchrÃ¶der, 2013. "Should developing countries undervalue their currencies?," Departmental Working Papers 2013-12, The Australian National University, Arndt-Corden Department of Economics.
- Robert Pollin & James Heintz, 2007. "Expanding Decent Employment in Kenya: The Role of Monetary Policy, Inflation Control, and the Exchange Rate," Country Study 6, International Policy Centre for Inclusive Growth.
- Ronald MacDonald & Flávio Vieira, 2010.
"A Panel Data Investigation of Real Exchange Rate Misalignment and Growth,"
CESifo Working Paper Series
3061, CESifo Group Munich.
- Ronald MacDonald & Flávio Vieira, . "A panel data investigation of real exchange rate misalignment and growth," Working Papers 2010_13, Business School - Economics, University of Glasgow.
- Flávio, Vieira & MacDonald, Ronald, 2010. "A Panel Data Investigation of Real Exchange Rate Misalignment and Growth," SIRE Discussion Papers 2010-29, Scottish Institute for Research in Economics (SIRE).
- Flavio Vilela Vieira & Ronald Macdonald, 2011. "A Panel Data Investigation Of Realexchange Rate Misalignment And Growth," Anais do XXXVIII Encontro Nacional de Economia [Proceedings of the 38th Brazilian Economics Meeting] 014, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
- Samba Mbaye, 2013.
"Currency undervaluation and growth: Is there a productivity channel?,"
CEPII research center, issue 133, pages 8-28.
- Mbaye, Samba, 2012. "Currency Undervaluation and Growth: Is there a Productivity Channel?," MPRA Paper 44261, University Library of Munich, Germany.
- James Heintz & Robert Pollin, 2008. "Targeting Employment Expansion, Economic Growth and Development in Sub-Saharan Africa: Outlines of an Alternative Economic Programme for the Region," Published Studies targeting_employment_expa, Political Economy Research Institute, University of Massachusetts at Amherst.
- Audrey Sallenave, 2010.
"Real exchange rate misalignments and economic performance for the G20 countries,"
EconomiX Working Papers
2010-1, University of Paris West - Nanterre la Défense, EconomiX.
- Audrey Sallenave, 2010. "Real Exchange Rate Misalignments and Economic Performance for the G20 Countries," Economie Internationale, CEPII research center, issue 121, pages 59-80.
- Aliyu, Shehu Usman Rano, 2008.
"Exchange Rate Volatility and Export Trade in Nigeria: An Empirical Investigation,"
13490, University Library of Munich, Germany, revised 17 Feb 2009.
- Shehu Usman Rano Aliyu, 2010. "Exchange rate volatility and export trade in Nigeria: an empirical investigation," Applied Financial Economics, Taylor & Francis Journals, vol. 20(13), pages 1071-1084.
- Samba MBAYE, 2012.
"Real Exchange Rate Undervaluation and Growth: Is there a Total Factor Productivity Growth Channel?,"
- Samba Mbaye, 2012. "Real Exchange Rate Undervaluation and Growth: Is there a Total Factor Productivity Growth Channel?," Working Papers halshs-00687948, HAL.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hugo E. A. da Gama Cerqueira).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.