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Is devaluation expansionary or contractionary? Empirical evidence from Fiji

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  • Paresh Kumar Narayan
  • Seema Narayan

Abstract

Devaluation has been traditionally promoted as an effective tool for increasing exports and improving the external position of the devaluing country if a nominal devaluation results in expenditure switching. In this article, our aim is to model the relationship between currency devaluations and output for Fiji. Following the approach in Bahmani et al. (2002), we extend the traditional model by incorporating other monetary and fiscal policy variables. We achieve our goal by using the recently developed bounds testing approach to cointegration and the autoregressive distributed lag model and find that devaluation is expansionary in the case of Fiji.

Suggested Citation

  • Paresh Kumar Narayan & Seema Narayan, 2007. "Is devaluation expansionary or contractionary? Empirical evidence from Fiji," Applied Economics, Taylor & Francis Journals, vol. 39(20), pages 2589-2598.
  • Handle: RePEc:taf:applec:v:39:y:2007:i:20:p:2589-2598
    DOI: 10.1080/00036840600707266
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    Citations

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    Cited by:

    1. Manuel CANTAVELLA-JORDA & Sheila Amin GUTIERREZ DE PIÑERES, 2012. "A Cross-national Panel Study of Devaluations on Disaggregated Export Sectors: A Case for Sector Specific Policies," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 12(2).
    2. Christoph S. Weber, 2016. "Central Bank Transparency and Inflation (Volatility) – New Evidence," Working Papers 163, Bavarian Graduate Program in Economics (BGPE).
    3. Artatrana Ratha, 2010. "Twin Deficits or Distant Cousins? Evidence from India," Working Papers 2010-5 Classification- F , Saint Cloud State University, Department of Economics.
    4. Akmal, Muhammad Shahbaz & Ahmad, Khalil & Ali, Muhammad, 2009. "Exports-Led Growth Hypothesis in Pakistan: Further Evidence," MPRA Paper 16043, University Library of Munich, Germany.
    5. Artatrana Ratha & Eungmin Kang & Mary Edwards, 2008. "Does an Undervalued Currency Promote Growth? Evidence from China," Working Papers 2008-2 Classification- F3, Saint Cloud State University, Department of Economics.
    6. BAHMANI-OSKOOEE, Mohsen & Mohammadian, Amirhossein, 2017. "On the Relation between Domestic Output and Exchange Rate in 68 Countries: An Asymmetry Analysis," MPRA Paper 82939, University Library of Munich, Germany, revised 05 Apr 2017.
    7. Artatrana Ratha, 2010. "Does Devaluation work for India?," Economics Bulletin, AccessEcon, vol. 30(1), pages 247-264.
    8. Muhammad Shahbaz & Faridul Islam & Naveed Aamir, 2012. "Is devaluation contractionary? Empirical evidence for Pakistan," Economic Change and Restructuring, Springer, vol. 45(4), pages 299-316, November.
    9. Narayan, Paresh Kumar & Narayan, Seema & Prasad, Arti, 2008. "Understanding the oil price-exchange rate nexus for the Fiji islands," Energy Economics, Elsevier, vol. 30(5), pages 2686-2696, September.
    10. repec:kap:ecopln:v:51:y:2018:i:2:d:10.1007_s10644-017-9201-x is not listed on IDEAS
    11. repec:kap:iecepo:v:15:y:2018:i:1:d:10.1007_s10368-016-0365-z is not listed on IDEAS
    12. Perekunah Eregha & Arcade Ndoricimpa & Solomon Olakojo & Mamello Nchake & Owen Nyang'oro & Edith Togba, 2016. "Nigeria: Should the Government Float or Devalue the Naira?," African Development Review, African Development Bank, vol. 28(3), pages 247-263, September.
    13. Prakash, Kushneel & Maiti, Dibyendu, 2016. "Does devaluation improve trade balance in small island economies? The case of Fiji," Economic Modelling, Elsevier, vol. 55(C), pages 382-393.

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