Currency Misalignments and Growth: a New Look Using Nonlinear Panel Data Methods
AbstractThe aim of this paper is to investigate the link between currency misalignments and economic growth. Relying on panel cointegration techniques, we calculate real exchange rate (RER) misalignments as deviations of actual RERs from their equilibrium values for a set of advanced and emerging economies. Estimating panel smooth transition regression models, we show that RER misalignments have a differentiated impact on economic growth depending on their sign: whereas overvaluations negatively affect economic growth, real exchange rate undervaluations significantly enhance it. This result indicates that undervaluations may drive the exchange rate to a level that encourages exports and promotes growth.
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Bibliographic InfoPaper provided by CEPII research center in its series Working Papers with number 2009-17.
Date of creation: Sep 2009
Date of revision:
GROWTH; EXCHANGE RATE MISALIGNMENTS; NONLINEARITY; PSTR MODELS;
Other versions of this item:
- Sophie Béreau & Antonia L�pez Villavicencio & Valérie Mignon, 2012. "Currency misalignments and growth: a new look using nonlinear panel data methods," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 44(27), pages 3503-3511, September.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-23 (All new papers)
- NEP-FDG-2010-01-23 (Financial Development & Growth)
- NEP-IFN-2010-01-23 (International Finance)
- NEP-OPM-2010-01-23 (Open Economy Macroeconomics)
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