Real exchange rate misalignments and economic performance for the G20 countries
AbstractWe evaluate the growth effects of real effective exchange rate misalignments for the G20 countries over the period 1980-2006. To this end, we first estimate real effective equilibrium exchange rates relying on the behavioral approach BEER, from which misalignments are derived. Second, we estimate a dynamic panel growth model in which among the traditional determinants of growth, our measure of misalignments is included. Our findings put forward some important differences between developed and emerging economies. The magnitude of the misalignments is more pronounced in the case of emerging countries, and the speed of convergence towards the estimated equilibrium exchange rate is slower for industrialized ones. Turning to our growth regression analysis, we find that misalignments have a negative effect on the economic growth. As a consequence, an appropriate exchange rate policy would close the gap between real exchange rates and their equilibrium level.
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Bibliographic InfoPaper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2010-1.
Length: 29 pages
Date of creation: 2010
Date of revision:
Equilibrium Real Effective Exchange Rate; Group of Twenty; Growth; Misalignments; Panel Cointegration;
Other versions of this item:
- Audrey Sallenave, 2010. "Real Exchange Rate Misalignments and Economic Performance for the G20 Countries," Economie Internationale, CEPII research center, issue 121, pages 59-80.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-06 (All new papers)
- NEP-CBA-2010-03-06 (Central Banking)
- NEP-FDG-2010-03-06 (Financial Development & Growth)
- NEP-IFN-2010-03-06 (International Finance)
- NEP-OPM-2010-03-06 (Open Economy Macroeconomics)
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