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Real Exchange Rate Misalignments and Economic Performance for the G20 Countries

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  • Audrey Sallenave

Abstract

We evaluate the growth effects of real effective exchange rate misalignments for the G20 countries over the period 1980-2006. To this end, we first estimate real effective equilibrium exchange rates relying on the behavioral approach BEER, from which misalignments are derived. Second, we estimate a dynamic panel growth model in which among the traditional determinants of growth, our measure of misalignments is included. Our findings put forward some important differences between developed and emerging economies. The magnitude of the misalignments is more pronounced in the case of emerging countries, and the speed of convergence towards the estimated equilibrium exchange rate is slower for industrialized ones. Turning to our growth regression analysis, we find that misalignments have a negative effect on the economic growth. As a consequence, an appropriate exchange rate policy would close the gap between real exchange rates and their equilibrium level.

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Bibliographic Info

Article provided by CEPII research center in its journal International Economics/Economie Internationale.

Volume (Year): (2010)
Issue (Month): 121 ()
Pages: 59-80

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Handle: RePEc:cii:cepiei:2010-1tc

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Keywords: Equilibrium real effective exchange rate; group of twenty; growth; misalignments; panel cointegration;

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Cited by:
  1. Ignazio Angeloni & Agnès Bénassy-Quéré & Benjamin Carton & Christophe Destais & Zsolt Darvas & Jean Pisani-Ferry & André Sapir & Shahin Vallée, . "Global currencies for tomorrow: a European perspective," Blueprints, Bruegel, number 592, June.
  2. Wlasiuk, Juan Marcos, 2013. "The Mechanics of Real Undervaluation and Growth," MPRA Paper 56628, University Library of Munich, Germany.

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