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The Effects of Exchange Rate Fluctuations on Output and Prices: Evidence from Developing Countries

Author

Listed:
  • Kandil, Magda
  • Mirazaie, Ida

    (Interbational Monetary Fund,USA
    John Carroll University,USA)

Abstract

The paper examines the effects of exchange rate fluctuations on real output and prices in a sample of 33 developing countries. The theoretical model decomposes movements in the exchange rate into anticipated and unanticipated components. Unanticipated currency fluctuations determine aggregate demand through exports, imports, and the demand for domestic currency, and determine aggregate supply through the cost of imported intermediate goods. Anticipated exchange rate depreciation, through the supply channel, has limited effects on output growth and price inflation. Unanticipated currency fluctuations appear more significant, with varying effects on output growth and price inflation across developing countries.

Suggested Citation

  • Kandil, Magda & Mirazaie, Ida, 2004. "The Effects of Exchange Rate Fluctuations on Output and Prices: Evidence from Developing Countries," Journal of Developing Areas, Tennessee State University, College of Business, vol. 38(2), pages 189-219, January-M.
    • Handle: RePEc:jda:journl:vol.38:year:2004:issue2:pp:189-219
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    1. is not listed on IDEAS
    2. Huy Truong Quang & Yoshinori Hara, 2019. "Managing risks and system performance in supply network: a conceptual framework," International Journal of Logistics Systems and Management, Inderscience Enterprises Ltd, vol. 32(2), pages 245-271.
    3. Viktor Shevchuk, 2017. "The Impact of Anticipated and Unanticipated Exchange Rate Variability in Ukraine," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 241, pages 34-47.
    4. repec:ukb:journl:y:2017:i:241:p:33-46 is not listed on IDEAS
    5. Muhammad Jalib Sikandar & Hafiz Muhammad Yasin & Malik Muhammad, 2019. "Exchange Rate Uncertainty and Workers’ Remittances: Empirical Bayesian Approach," Journal of Quantitative Methods, University of Management and Technology, Lahore, Pakistan, vol. 3(2), pages 90-109.
    6. Magda Kandil & Ida A. Mirzaie, 2008. "The Impact Of Capital and Remittance Flows on Economic Performance in MENA Countries," Working Papers 440, Economic Research Forum, revised 09 Jan 2008.
    7. Chan, Tze-Haw, 2014. "Trade Balance, Foreign Exchange and Macroeconomic Impacts: An Empirical Assessment for China and Malaysia," MPRA Paper 59539, University Library of Munich, Germany, revised 10 Aug 2014.
    8. Sajid Ali, 2016. "How does Interest rate effect Exchange rate of Pakistan. Evidence of ARDL Bound Testing Approach," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 1(2), pages 119-133, October.
    9. Adebayo Augustine Kutu & Harold Ngalawa, 2017. "Modelling Exchange Rate Volatility and Global Shocks in South Africa," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 13(3), pages 178-193, JUNE.
    10. Magda Kandil & Ida Mirzaie, 2006. "Consumption and macroeconomic policies: Theory and evidence from developing countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(4), pages 469-491.
    11. Zakee SAADAT & Dawood MAMOON, 2016. "Destination EU and USA: Improving Export Potential of Pakistan by Trading with India," Journal of Economics and Political Economy, EconSciences Journals, vol. 3(4), pages 659-669, December.
    12. Bricongne, Jean-Charles & Marolleau, Louis, 2025. "The impact of monetary surprises on exchange rates: Results from textual and high-frequency analysis," Journal of International Money and Finance, Elsevier, vol. 158(C).
    13. Karrar Hussain, 2009. "Causal Ordering Between Inflation and Productivity of Labor and Capital: An Empirical Approach for Pakistan," CID Working Papers 39, Center for International Development at Harvard University.
    14. Jameelah Omolara Yaqub, 2013. "The Impact of Exchange Rate Changes on Disaggregated Agricultural Output in Nigeria: A Two-Stage-Least-Squares Approach," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 6(1), pages 75-89, April.
    15. Harold Ngalawa & Adebayo Augustine Kutu, 2017. "Modelling exchange rate variations and global shocks in Brazil," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 35(1), pages 73-95.

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    Keywords

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    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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