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How important is the real exchange rate for exports and growth?

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  • Robert A. Blecker

    (N/A)

Abstract

Economists have long debated whether the real exchange rate (RER) has a significant impact on export performance and output growth. Some claim that export performance depends only on nonprice competition and the RER is irrelevant to long-run growth, whereas others argue that the RER is a key variable for promoting long-run economic development. Neither extreme view is supported by recent empirical evidence. Most econometric studies find significant effects of RERs on exports and growth, but subject to numerous qualifications. For example, RER effects on exports differ by type of goods exported, while the negative effects of overvaluation on growth may be stronger than the positive effects of undervaluation. Even if RER effects on growth rates are found only for medium-run transitions, these may imply a long-run impact on levels of output.

Suggested Citation

  • Robert A. Blecker, 2023. "How important is the real exchange rate for exports and growth?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 20(2), pages 250-265, November.
    • Handle: RePEc:elg:ejeepi:v:20:y:2023:i:1:p250-265
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    More about this item

    Keywords

    real exchange rate; economic growth; overvaluation; export performance; structural change; traverse;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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