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Exchange rate undervaluation and economic growth: Díaz Alejandro (1965) revisited

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  • Glüzmann, Pablo Alfredo
  • Levy-Yeyati, Eduardo
  • Sturzenegger, Federico

Abstract

To understand the growth effects of currency undervaluation we estimate its impact on the different components of GDP. We find that, for developing countries, undervaluation does not affect the tradable sector, but does lead to greater domestic savings and investment, as well as employment.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 117 (2012)
Issue (Month): 3 ()
Pages: 666-672

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Handle: RePEc:eee:ecolet:v:117:y:2012:i:3:p:666-672

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Undervaluation; Economic growth; Real exchange rate;

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References

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  1. Aghion, Philippe & Bacchetta, Philippe & Rancière, Romain & Rogoff, Kenneth, 2006. "Exchange Rate Volatility and Productivity Growth: The Role of Financial Development," CEPR Discussion Papers 5629, C.E.P.R. Discussion Papers.
  2. Philippe Aghion & Diego Comin & Peter Howitt & Isabel Tecu, 2009. "When Does Domestic Saving Matter for Economic Growth?," Harvard Business School Working Papers 09-080, Harvard Business School.
  3. Aizenman, Joshua & LEE, JAEWOO, 2005. "International Reserves: Precautionary versus Mercantilist Views, Theory and Evidence," Santa Cruz Center for International Economics, Working Paper Series qt44g3n2j8, Center for International Economics, UC Santa Cruz.
  4. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2005. "What You Export Matters," NBER Working Papers 11905, National Bureau of Economic Research, Inc.
  5. Joshua Aizenman & Jaewoo Lee, 2006. "Financial Versus Monetary Mercantilism-Long-run View of Large International Reserves Hoarding," NBER Working Papers 12718, National Bureau of Economic Research, Inc.
  6. Raghuram G. Rajan & Arvind Subramanian, 2009. "Aid, Dutch Disease, and Manufacturing Growth," Working Papers 196, Center for Global Development.
  7. Martin Neil Baily & Robert M. Solow, 2001. "International Productivity Comparisons Built from the Firm Level," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 151-172, Summer.
  8. Eduardo Levy Yeyati, 2008. "Liquidity Insurance in a Financially Dollarized Economy," NBER Chapters, in: Financial Markets Volatility and Performance in Emerging Markets, pages 185-218 National Bureau of Economic Research, Inc.
  9. Philippe Aghion & George-Marios Angeletos & Abhijit Banerjee & Kalina Manova, 2005. "Volatility and Growth: Credit Constraints and Productivity-Enhancing Investment," NBER Working Papers 11349, National Bureau of Economic Research, Inc.
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Cited by:
  1. Christian Daude & Arne Nagengast & José Ramón Perea, 2014. "Productive Capabilities: An Empirical Investigation of their Determinants," OECD Development Centre Working Papers 321, OECD Publishing.
  2. Eduardo Levy Yeyati and Federico Sturzenegger, 2007. "Fear of Appreciation," Business School Working Papers fearapp, Universidad Torcuato Di Tella.
  3. 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.

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