IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v41y2009i2p139-150.html
   My bibliography  Save this article

Are devaluations contractionary in MENA countries?

Author

Listed:
  • Mohsen Bahmani-Oskooee
  • Magda Kandil

Abstract

Currency depreciation reduces aggregate supply by raising cost of imported inputs and increases aggregate demand by increasing its net export component. Depending on the relative strength of the two effects, depreciation could be expansionary or contractionary. We employ the bounds testing approach to cointegration and error-correction modelling to evaluate the effects of exchange rate depreciation on output growth, both in the short and in the long-run, across a sample of MENA countries. Exchange rate fluctuations are found to be important to fluctuations in real output growth in the short-run. Anticipated exchange rate depreciation may induce long-run expansionary or contractionary effects on output supply. Consistent with theory's predictions, the expansionary effect of unanticipated depreciation is only transitory on output growth. Nonetheless, unanticipated depreciation is found to have a contractionary effect on output growth in the long-run via an increase in the cost of imported inputs.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Magda Kandil, 2009. "Are devaluations contractionary in MENA countries?," Applied Economics, Taylor & Francis Journals, vol. 41(2), pages 139-150.
    • Handle: RePEc:taf:applec:v:41:y:2009:i:2:p:139-150
    DOI: 10.1080/00036840600994195
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840600994195
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036840600994195?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abdallah, Ali, 2022. "Dépréciation réelle de la monnaie et croissance économique [Can real currency depreciation lead growth?]," MPRA Paper 113183, University Library of Munich, Germany.
    2. An, Lian & Kim, Gil & Ren, Xiaomei, 2014. "Is devaluation expansionary or contractionary: Evidence based on vector autoregression with sign restrictions," Journal of Asian Economics, Elsevier, vol. 34(C), pages 27-41.
    3. Mohsen Bahmani-Oskooee & Amirhossein Mohammadian, 2018. "Asymmetry Effects of Exchange Rate Changes on Domestic Production in Emerging Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(6), pages 1442-1459, May.
    4. 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).
    5. Mohsen Bahmani-Oskooee & Augustine C. Arize, 2020. "Asymmetric response of domestic production to exchange rate changes: evidence from Africa," Economic Change and Restructuring, Springer, vol. 53(1), pages 1-24, February.
    6. Akbar, Muhammad & Ahmad, Eatzaz, 2021. "Repercussions of exchange rate depreciation on the economy of Pakistan: Simulation analysis using macroeconometric model," Journal of Policy Modeling, Elsevier, vol. 43(3), pages 574-600.
    7. Lian An & Xiaomei Ren & Huimin Li & Jing Xu, 2017. "Exchange Rate And Us Macroeconomy: Evidence From The Factor-Augmented Vector Autoregressive Model," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 62(02), pages 483-508, June.
    8. Azzouzi, asmae & Bousselhamia, Ahmed, 2019. "Impact Des Variations Du Taux De Change Reel Sur L'Economie Marocaine : Une Approche Svar A Des Restrictions De Signes [Impact Of Real Exchange Rate Variations On The Moroccan Economy: A Svar Appro," MPRA Paper 110397, University Library of Munich, Germany.
    9. Mohsen Bahmani-Oskooee & Ferda Halicioglu & Amirhossein Mohammadian, 2018. "On the asymmetric effects of exchange rate changes on domestic production in Turkey," Economic Change and Restructuring, Springer, vol. 51(2), pages 97-112, May.
    10. Suleman Ghaffar & Humaira Munir & Shahbaz Nawaz & Anam Javaid, 2019. "The Impact of International Trade on Economic Growth: A Case Study of Pakistan," Asian Journal of Social Sciences and Management Studies, Asian Online Journal Publishing Group, vol. 6(2), pages 15-22.
    11. 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.
    12. Sweidan Osama D., 2013. "Exchange Rate Pass-Through into Import Prices in Jordan," Global Economy Journal, De Gruyter, vol. 13(1), pages 109-128, January.
    13. Boubellouta Bilal & Muhammad Shahbaz, 2021. "Comparing the Relationship Between Nominal and Real Effective Exchange Rates During the Last Two Devaluations in Algeria," Global Business Review, International Management Institute, vol. 22(6), pages 1421-1440, December.
    14. Mohsen Bahmani-Oskooee & Amirhossein Mohammadian, 2016. "Asymmetry Effects of Exchange Rate Changes on Domestic Production: Evidence from Nonlinear ARDL Approach," Australian Economic Papers, Wiley Blackwell, vol. 55(3), pages 181-191, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:41:y:2009:i:2:p:139-150. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.