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International financial integration and real exchange rate long-run dynamics in emerging countries: Some panel evidence

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  • Guglielmo Maria Caporale
  • Thouraya Hadj Amor
  • Christophe Rault

Abstract

The aim of this article is to provide new empirical evidence on the impact of international financial integration on the long-run Real Exchange Rate (RER) in 39 developing countries belonging to three different geographical regions (Latin America, Asia and MENA). It covers the period 1979--2004, and carries out ‘second-generation’ tests for non-stationary panels. Several factors, including international financial integration, are shown to drive the long-run RER in emerging countries. It is found that the new financial environment characterised by international financial integration leads to a depreciation of the RER in the long run. Further, RER misalignments take the form of an under-valuation in most MENA countries and an over-valuation in most Latin American and Asian countries.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.

Volume (Year): 20 (2011)
Issue (Month): 6 (September)
Pages: 789-808

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Handle: RePEc:taf:jitecd:v:20:y:2011:i:6:p:789-808

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Cited by:
  1. Mohamed El Hedi Arouri & Adel Ben Youssef & Hatem M'Henni & Christophe Rault, 2012. "Energy Consumption, Economic Growth and CO2 Emissions in Middle East and North African Countries," CESifo Working Paper Series 3726, CESifo Group Munich.
  2. Kearney, Colm, 2012. "Emerging markets research: Trends, issues and future directions," Emerging Markets Review, Elsevier, vol. 13(2), pages 159-183.
  3. Maria Gelman & Axel Jochem & Stefan Reitz & Mark P. Taylor, 2014. "Real Financial Market Exchange Rates and Capital Flows," Kiel Working Papers 1945, Kiel Institute for the World Economy.
  4. Guglielmo Maria Caporale & Thouraya Hadj Amor & Christophe Rault, 2011. "Sources of Real Exchange Rate Volatility and International Financial Integration: A Dynamic GMM Panel Approach," CESifo Working Paper Series 3645, CESifo Group Munich.

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