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Exchange rate volatility and growth in small open economies at the EMU periphery

  • Schnabl, Gunther

Since the introduction of the euro in January 1999, exchange rate stability in the periphery of the euro area is growing. The paper investigates the impact of exchange rate stability on growth for a sample of 41 mostly small open economies at the EMU periphery. It identifies international trade, international capital flows and macroeconomic stability as important transmission channels from exchange rate stability to more growth. Panel estimations reveal a robust negative relationship between exchange rate volatility and growth for countries in the economic catch-up process with open capital accounts.

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File URL: http://www.sciencedirect.com/science/article/B6W8Y-4RDS40W-2/1/de52e6e4e36a5d027049e0d323b4e115
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Article provided by Elsevier in its journal Economic Systems.

Volume (Year): 32 (2008)
Issue (Month): 1 (March)
Pages: 70-91

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Handle: RePEc:eee:ecosys:v:32:y:2008:i:1:p:70-91
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  9. Aghion, Philippe & Bacchetta, Philippe & Ranciere, Romain & Rogoff, Kenneth S., 2009. "Exchange Rate Volatility and Productivity Growth: The Role of Financial Development," Scholarly Articles 12490419, Harvard University Department of Economics.
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  11. Ronald McKinnon & Gunther Schnabl, 2003. "Synchronized Business Cycles in East Asia and Fluctuations in the Yen/Dollar Exchange Rate," Working Papers 022003, Hong Kong Institute for Monetary Research.
  12. Michael B. Devereux & Philip R. Lane, 2002. "Understanding Bilateral Exchange Rate Volatility," Trinity Economics Papers 200211, Trinity College Dublin, Department of Economics.
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  18. Ronald McKinnon & Gunther Schnabl, 2006. "China's Exchange Rate and International Adjustment in Wages, Prices and Interest Rates: Japan Déjà Vu?," CESifo Economic Studies, CESifo, vol. 52(2), pages 276-303, June.
  19. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange Rates and Financial Fragility," NBER Working Papers 7418, National Bureau of Economic Research, Inc.
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  24. Schnabl, Gunther, 2006. "Capital markets and exchange rate stabilization in East Asia: Diversifying risk based on currency baskets," HWWI Research Papers 2-1, Hamburg Institute of International Economics (HWWI).
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  27. DANNE, Christian & SCHNABL, Gunther, 2008. "A role model for China? Exchange rate flexibility and monetary policy in Japan," China Economic Review, Elsevier, vol. 19(2), pages 183-196, June.
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