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Does Latin America Have More to Gain From Exchange Rate Liberalization than Sub-Saharan Africa?

  • Armah Bartholomew
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    An examination of the relationship between exchange rate liberalization and economic growth in selected Latin American and Sub-Saharan African countries reveals evidence of a short-run causal relationship between the two variables in both Latin America and Sub-Saharan Africa. Within each region, exchange rate liberalization causes growth in some countries while others exhibit reverse causality running from growth to exchange rate leads to increased growth and growth induces exchange rate liberalization in most Latin American countries, in the majority of Sub-Saharan African countries studied, exchange rate liberalization reduces growth while growth causes distortions in the exchange rate. Market imperfections, expansionary fiscal and monetary policies under a fixed exchange rate regime, and poor terms of trade are cited as possible explanations for the findings for Sub-Saharan Africa. [F, O]

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/10168730000000021
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    Article provided by Taylor & Francis Journals in its journal International Economic Journal.

    Volume (Year): 14 (2000)
    Issue (Month): 2 ()
    Pages: 113-132

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    Handle: RePEc:taf:intecj:v:14:y:2000:i:2:p:113-132
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    1. Anne O. Krueger, 1980. "Trade Policy as an Input to Development," NBER Working Papers 0466, National Bureau of Economic Research, Inc.
    2. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
    3. Balassa, Bela, 1978. "Exports and economic growth : Further evidence," Journal of Development Economics, Elsevier, vol. 5(2), pages 181-189, June.
    4. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
    5. Leslie Lipschitz, 1979. "Exchange Rate Policy for a Small Developing Country, and the Selection of an Appropriate Standard (Politique du taux de change pour un petit pays en développement et sélection d'un étalon appropriÃ," IMF Staff Papers, Palgrave Macmillan, vol. 26(3), pages 423-449, September.
    6. Lal, Deepak & Rajapatirana, Sarath, 1987. "Foreign Trade Regimes and Economic Growth in Developing Countries," World Bank Research Observer, World Bank Group, vol. 2(2), pages 189-217, July.
    7. Michaely, Michael, 1977. "Exports and growth : An empirical investigation," Journal of Development Economics, Elsevier, vol. 4(1), pages 49-53, February.
    8. repec:cup:cbooks:9780521482165 is not listed on IDEAS
    9. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
    10. Jagdish N. Bhagwati, 1978. "Anatomy and Consequences of Exchange Control Regimes," NBER Books, National Bureau of Economic Research, Inc, number bhag78-1, December.
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