Exchange rate misalignments and economic growth: A threshold panel approach
This study deals with the link between exchange rate misalignments (ERM) and economic growth, for a large sample of advanced and emerging economies on the period 1982-2010. The estimation of equilibrium exchange rate (EER) is based on a FEER approach. The relation "misalignments-growth" is estimated using a PSTR (Panel Smooth Transition Regression) and GMM models. Our main results show that the impact of ERM on economic growth is nonlinear and asymmetric. An overvaluation has a negative impact on growth while an undervaluation sustains growth until an estimated threshold (15.5% for emerging countries and 9% for developed countries). The coefficient is weaker for emerging countries (0.02) than for developed countries (0.08). Due to non linearity and coefficient's value, the undervaluation has a positive effect on growth even beyond the threshold. We also demonstrate that the impact of ERM on growth is positive only in the case of small undervaluation for emerging countries. However, concerning developed countries, the undervaluation have a positive effect on growth even beyond the estimated threshold.
Volume (Year): 33 (2013)
Issue (Month): 2 ()
|Contact details of provider:|| |
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.:
- Eitrheim, Øyvind & Teräsvirta, Timo, 1995.
"Testing the Adequacy of Smooth Transition Autoregressive Models,"
SSE/EFI Working Paper Series in Economics and Finance
56, Stockholm School of Economics.
- Eitrheim, Oyvind & Terasvirta, Timo, 1996. "Testing the adequacy of smooth transition autoregressive models," Journal of Econometrics, Elsevier, vol. 74(1), pages 59-75, September.
- Se-Eun Jeong & Jacques Mazier & Jamel Saadaoui, 2010.
"Exchange Rate Misalignments at World and European Levels: a FEER Approach,"
CEPII research center, issue 121, pages 25-58.
- Se-Eun Jeong & Jacques Mazier & Jamel Saadaoui, 2010. "Exchange Rate Misalignments at World and European Levels: a FEER Approach," Post-Print halshs-00435836, HAL.
- Nabil Aflouk & Se-Eun Jeong & Jacques Mazier & Jamel Saadaoui, 2010.
"Exchange Rate Misalignments and International Imbalances a FEER Approach for Emerging Countries,"
CEPII research center, issue 124, pages 31-74.
- Nabil Aflouk & Se-Eun Jeong & Jacques Mazier & Jamel Saadaoui, 2011. "Exchange Rate Misalignments and World Imbalances: a FEER Approach for Emerging Countries," Post-Print halshs-00484808, HAL.
- Fouquau, Julien & Bessec, Marie, 2008.
"The Non-Linear Link between Electricity Consumption and Temperature in Europe : A Threshold Panel Approach,"
Economics Papers from University Paris Dauphine
123456789/8180, Paris Dauphine University.
- Bessec, Marie & Fouquau, Julien, 2008. "The non-linear link between electricity consumption and temperature in Europe: A threshold panel approach," Energy Economics, Elsevier, vol. 30(5), pages 2705-2721, September.
- Marie Bessec & Julien FOUQUAU, 2007. "The Non-linear Link between Electricity Consumption and Temperature in Europe: a Threshold Panel Approach," Working Papers 1636, Orleans Economic Laboratorys, University of Orleans.
- William R. Cline, 2008. "Estimating Consistent Fundamental Equilibrium Exchange Rates," Working Paper Series WP08-6, Peterson Institute for International Economics.
- M Arellano & O Bover, 1990.
"Another Look at the Instrumental Variable Estimation of Error-Components Models,"
CEP Discussion Papers
dp0007, Centre for Economic Performance, LSE.
- Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
- Andres Gonzalez & Timo Terasvirta & Dick van Dijk, 2005.
"Panel Smooth Transition Regression Models,"
Research Paper Series
165, Quantitative Finance Research Centre, University of Technology, Sydney.
- González, Andrés & Teräsvirta, Timo & van Dijk, Dick, 2005. "Panel Smooth Transition Regression Models," SSE/EFI Working Paper Series in Economics and Finance 604, Stockholm School of Economics.
- Se-Eun Jeong & Jacques Mazier, 2003. "Exchange Rate Regimes and Equilibrium Exchange Rates in East Asia," Revue économique, Presses de Sciences-Po, vol. 54(5), pages 1161-1182.
- Sophie Béreau & Antonia L�pez Villavicencio & Valérie Mignon, 2012.
"Currency misalignments and growth: a new look using nonlinear panel data methods,"
Taylor & Francis Journals, vol. 44(27), pages 3503-3511, September.
- Sophie Béreau & Antonia Lopez Villavicencio & Valérie Mignon, 2009. "Currency Misalignments and Growth: a New Look Using Nonlinear Panel Data Methods," Working Papers 2009-17, CEPII research center.
- Couharde, Cécile & Sallenave, Audrey, 2013. "How do currency misalignments’ threshold affect economic growth?," Journal of Macroeconomics, Elsevier, vol. 36(C), pages 106-120.
- Michael P Dooley & David Folkerts-Landau & Peter Garber, 2006.
"Interest rates, exchange rates and international adjustment,"
Conference Series ; [Proceedings],
Federal Reserve Bank of Boston, vol. 51.
- Michael P. Dooley & David Folkerts-Landau & Peter M. Garber, 2005. "Interest Rates, Exchange Rates and International Adjustment," NBER Working Papers 11771, National Bureau of Economic Research, Inc.
- Alvaro Aguirre & César Calderón, 2005. "Real Exchange Rate Misalignments and Economic Performance," Working Papers Central Bank of Chile 316, Central Bank of Chile.
- Ghura, Dhaneshwar & Grennes, Thomas J., 1993. "The real exchange rate and macroeconomic performance in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 42(1), pages 155-174, October.
- Andrew Berg & Yanliang Miao, 2010. "The Real Exchange Rate and Growth Revisited; The Washington Consensus Strikes Back?," IMF Working Papers 10/58, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-13-00094. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.