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Real Exchange Rate and Economic Growth: New Empirical Evidence

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  • Fabrício J. Missio
  • Frederico G. Jayme Jr.
  • Gustavo Britto
  • José Luis Oreiro

Abstract

type="main"> The article empirically analyses the relationship between real exchange rate (RER) and growth rate of output. We first estimate the effect of the index of RER undervaluation on the rate of output growth in two samples of countries from 1978 to 2007. Our contribution is the use of a different dataset that increases the number of countries in the sample, as well as the number of available control variables. In doing so, the article adds to the literature by applying a method that allows for the control of income levels (quantile regressions). So, we present new findings on a non-linear relationship the RER-growth nexus. We conclude that maintaining a competitive level of RER has positive effects on growth rate.

Suggested Citation

  • Fabrício J. Missio & Frederico G. Jayme Jr. & Gustavo Britto & José Luis Oreiro, 2015. "Real Exchange Rate and Economic Growth: New Empirical Evidence," Metroeconomica, Wiley Blackwell, vol. 66(4), pages 686-714, November.
    • Handle: RePEc:bla:metroe:v:66:y:2015:i:4:p:686-714
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    More about this item

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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