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Exchange rate undervaluation and R&D activity

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  • Chen, Shiu-Sheng

Abstract

We examine how real exchange rate undervaluation policy affects research and development (R&D) activity. Using a panel data set comprising 49 developed and developing countries covering 1996–2011, we show that undervaluing the exchange rate retards technological innovation. Such a negative impact is particularly prominent for developed countries. This paper provides new insights into the real effects of undervaluation policy on the economy. An implication of our work is that countries implementing exchange rate undervaluation policy should be mindful of its potential negative effects on research and development activity.

Suggested Citation

  • Chen, Shiu-Sheng, 2017. "Exchange rate undervaluation and R&D activity," Journal of International Money and Finance, Elsevier, vol. 72(C), pages 148-160.
  • Handle: RePEc:eee:jimfin:v:72:y:2017:i:c:p:148-160
    DOI: 10.1016/j.jimonfin.2017.01.008
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    References listed on IDEAS

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    Cited by:

    1. Florian Morvillier, 2018. "The role of exchange rate undervaluations on the inflation-growth nexus," EconomiX Working Papers 2018-15, University of Paris Nanterre, EconomiX.

    More about this item

    Keywords

    Research and development; Undervaluation policy;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls

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