Fear of Appreciation
Abstract
In recent years the term "fear of floating" has been used to describe exchange rate regimes that, while officially flexible, in practice intervene heavily to avoid sudden or large depreciations. However, the data reveals that in most cases (and increasingly so in the 2000s) intervention has been aimed at limiting appreciations rather than depreciations, often motivated by the neomercantilist view of a depreciated real exchange rate as protection for domestic industries. As a first step to address the broader question of whether this view delivers on its promise, we examine whether this “fear of appreciation” has a positive impact on growth performance in developing economies. We show that depreciated exchange rates appear to induce higher growth, but that the effect, rather than through import substitution or export booms as argued by the mercantilist view, works largely through the deepening of domestic savings and capital accumulation.Download Info
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Paper provided by Universidad Torcuato Di Tella in its series Business School Working Papers with number fearapp.Length: 40 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:udt:wpbsdt:fearapp
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Web page: http://www.utdt.edu/listado_contenidos.php?id_item_menu=4994
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Keywords:Other versions of this item:
- Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2007. "Fear of Appreciation," Working Paper Series rwp07-047, Harvard University, John F. Kennedy School of Government.
- Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2007. "Fear of appreciation," Policy Research Working Paper Series 4387, The World Bank.
- Levy-Yeyati, Eduardo & Sturzenegger, Federico & Gluzmann, Pablo, 2007. "Fear of Appreciation," MPRA Paper 42917, University Library of Munich, Germany, revised Nov 2012.
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-08 (All new papers)
- NEP-CBA-2007-12-08 (Central Banking)
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Citations
Blog mentions
As found by EconAcademics.org, the blog aggregator for Economics research:- Understanding the issue of Currency Wars
by Amol Agrawal in Mostly Economics on 2010-11-16 12:19:40 - Réquiem para el modelo de sustitución de importaciones
by ELY in Blog de Eduardo Levy Yeyati on 2011-02-25 23:20:00 - La Insoportable Levedad del RER
by Generico in Economista Serial Crónico on 2010-04-07 11:18:00 - Falso trilema (para econs)
by Javier Finkman in Exabruptos on 2010-05-14 09:24:00
Cited by:
- Cruz Rodriguez, Alexis, 2009. "Choosing and assessing exchange rate regimes: A survey of the literature," MPRA Paper 16314, University Library of Munich, Germany.
- Tavlas, George & Dellas, Harris & Stockman, Alan C., 2008.
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European Economic Review,
Elsevier, vol. 52(6), pages 941-963, August.
- George Tavlas & Harris Dellas & Alan Stockman, 2008. "The Classification and Perfomance of Alternative Exchange-Rate Systems," Working Papers 90, Bank of Greece.
- Aizenman, Joshua, 2011. "Hoarding international reserves versus a Pigovian tax-cum-subsidy scheme: Reflections on the deleveraging crisis of 2008-2009, and a cost benefit analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 35(9), pages 1502-1513, September.
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Policy Research Working Paper Series
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- Diallo, Ibrahima Amadou, 2011. "The effects of real exchange rate misalignment and real exchange volatility on exports," MPRA Paper 32387, University Library of Munich, Germany.
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