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Infrastructures and the real exchange rate

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  • Florian Morvillier

Abstract

This paper investigates the nonlinear relationship between infrastructures and the Real Effective Exchange Rate (REER). Applying a Panel Smooth Transition Regression (PSTR) model to a sample of 31 countries over the period 1973-2014, we find strong evidence of a nonlinear impact of Electricity Generating Capacity (EGC) and telecommunications on the REER dynamics. When the network is not completed or the stock of infrastructures is low, an increase in EGC and telecommunications depreciates the REER, while the additional depreciation is lower or inexistent once the network is established. Finally, turning to power grid quality, we show that higher electric power losses are associated with a REER depreciation that is particularly marked when the former are high.

Suggested Citation

  • Florian Morvillier, 2020. "Infrastructures and the real exchange rate," EconomiX Working Papers 2020-26, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2020-26
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    References listed on IDEAS

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    More about this item

    Keywords

    Infrastructures; Panel Smooth Transition Regression; Real Exchange Rate;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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