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 neo-mercantilist 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, the authors examine whether this"fear of appreciation"has a positive impact on growth performance in developing economies. The authors 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 thedeepening of domestic savings and capital accumulation.
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Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2007.
"Fear of Appreciation,"
Working Paper Series
rwp07-047, Harvard University, John F. Kennedy School of Government.
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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.:
Reinhart, Carmen & Calvo, Guillermo, 2002.
"Fear of floating,"
MPRA Paper
14000, University Library of Munich, Germany.
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Guillermo A. Calvo & Carmen M. Reinhart, 2000.
"Fear of Floating,"
NBER Working Papers
7993, National Bureau of Economic Research, Inc.
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