Modelling Real Exchange Rate Effects on Output Performance in Latin America

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Modelling Real Exchange Rate Effects on Output Performance in Latin America

Author Info

P Mejía-Reyes
D R Osborn
M Sensier

Additional information is available for the following registered author(s):

Abstract

This paper empirically analyses real per capita GDP growth for six Latin American countries (Argentina, Brazil, Chile, Columbia, Mexico, Venezuela) in terms of real exchange rate depreciations, inflation and US interest rates, focussing on the role of the real exchange rate. We find evidence of nonlinearity in this relationship, which we capture through a smooth transition regression model. With the exception of Mexico, nonlinearity in economic growth is associated with changes in the real exchange rate, with depreciations leading to different relationships compared with appreciations. Regimes for Mexico are associated with the business cycle through past growth rates, with effectively symmetric effects of real exchange rate changes. Overall, our results are in accord with other recent literature that depreciations have negative effects for growth.

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Publisher Info
Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 35.

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Length: 49 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:man:cgbcrp:35

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This paper has been announced in the following NEP Reports:

NEP-ALL-2004-09-30 (All new papers)
NEP-IFN-2004-09-30 (International Finance)
NEP-LAM-2004-09-30 (Central & South America)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Other versions:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Foster, Vivien & Yepes, Tito, 2006. "Is cost recovery a feasible objective for water and electricity ? The Latin American experience," Policy Research Working Paper Series 3943, The World Bank. [Downloadable!]
Andreas Röthig & Carl Chiarella, 2006. "Investigating nonlinear speculation in cattle, corn, and hog futures markets using logistic smooth transition regression models," Darmstadt Discussion Papers in Economics 167, Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology). [Downloadable!]
Other versions:
- Andreas Röthig & Carl Chiarella, 2006. "Investigating Nonlinear Speculation in Cattle, Corn and Hog Futures Markets Using Logistic Smooth Transition Regression Models," Research Paper Series 172, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]

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