Convergence, Competitiveness and the Exchange Rate
AbstractStandard theory predicts that exchange rate changes have merely temporary real effects. Yet, if the higher profits that a devaluation ensures are used to improve non-price competitiveness, longer-run effects are possible. The paper looks at the experience of Germany, Spain, France and Italy which, in the 1950s and 1960s, either benefited from low parities or devalued their currencies. Favourable exchange rates probably contributed to these countries' rapid growth, but so did trade liberalization. In today's Europe the scope for further trade liberalization is limited while the uncertainties introduced by floating exchange rates make successful devaluations less likely.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 970.
Date of creation: Jun 1994
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- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
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