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Is devaluation expansionary or contractionary? Empirical evidence from Fiji

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  • Paresh Kumar Narayan
  • Seema Narayan

Abstract

Devaluation has been traditionally promoted as an effective tool for increasing exports and improving the external position of the devaluing country if a nominal devaluation results in expenditure switching. In this article, our aim is to model the relationship between currency devaluations and output for Fiji. Following the approach in Bahmani et al. (2002), we extend the traditional model by incorporating other monetary and fiscal policy variables. We achieve our goal by using the recently developed bounds testing approach to cointegration and the autoregressive distributed lag model and find that devaluation is expansionary in the case of Fiji.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840600707266
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 39 (2007)
Issue (Month): 20 ()
Pages: 2589-2598

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Handle: RePEc:taf:applec:v:39:y:2007:i:20:p:2589-2598

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Cited by:
  1. Manuel CANTAVELLA-JORDA & Sheila Amin GUTIERREZ DE PIÑERES, 2012. "A Cross-national Panel Study of Devaluations on Disaggregated Export Sectors: A Case for Sector Specific Policies," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 12(2).
  2. Akmal, Muhammad Shahbaz & Ahmad, Khalil & Ali, Muhammad, 2009. "Exports-Led Growth Hypothesis in Pakistan: Further Evidence," MPRA Paper 16043, University Library of Munich, Germany.
  3. Muhammad Shahbaz & Faridul Islam & Naveed Aamir, 2012. "Is devaluation contractionary? Empirical evidence for Pakistan," Economic Change and Restructuring, Springer, vol. 45(4), pages 299-316, November.
  4. Artatrana Ratha & Eungmin Kang & Mary Edwards, 2008. "Does an Undervalued Currency Promote Growth? Evidence from China," Working Papers 2008-2 Classification- F3, Saint Cloud State University, Department of Economics.
  5. Narayan, Paresh Kumar & Narayan, Seema & Prasad, Arti, 2008. "Understanding the oil price-exchange rate nexus for the Fiji islands," Energy Economics, Elsevier, vol. 30(5), pages 2686-2696, September.
  6. Artatrana Ratha, 2010. "Does Devaluation work for India?," Economics Bulletin, AccessEcon, vol. 30(1), pages 247-264.

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