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

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  • 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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    References listed on IDEAS

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    Cited by:

    1. repec:ukb:journl:y:2017:i:241:p:33-46 is not listed on IDEAS
    2. 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.
    3. 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.
    4. Mohsen Bahmani-Oskooee & Magda Kandil, 2010. "Exchange Rate Fluctuations and Output in Oil-Producing Countries: The Case of Iran," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(3), pages 23-45, May.
    5. 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.
    6. Zakee SAADAT & Dawood MAMOON, 2016. "Destination EU and USA: Improving Export Potential of Pakistan by Trading with India," Journal of Economics and Political Economy, KSP Journals, vol. 3(4), pages 659-669, December.
    7. Mohsen Bahmani-Oskooee & Magda Kandil, 2010. "Exchange Rate Fluctuations and Output in Oil-Producing Countries: The Case of Iran," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 46(3), pages 23-45, May.
    8. Hussain, Karrar, 2009. "Causal Ordering Between Inflation and Productivity of Labor and Capital: An Empirical Approach for Pakistan," MPRA Paper 16486, University Library of Munich, Germany.
    9. 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), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 6(1), pages 75-89, April.
    10. repec:rfe:zbefri:v:35:y:2017:i:1:p:73-95 is not listed on IDEAS

    More about this item

    Keywords

    exchange rate; anticipated vs. unanticipated appreciation; supply vs. demand channels; real and inflationary effects;

    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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