Fertility and the Real Exchange Rate
We use a quinquennial data set covering 87 countries between 1975 and 2005 to investigate the relationship between fertility and the real effective exchange rate. Theoretically a country experiencing a decline in its fertility rate can be expected to have higher savings, lower investment, a current account surplus, and accordingly a real depreciation. We test and confirm this hypothesis, controlling for a host of potential determinants such as PPP deviations and the Balassa-Samuelson effect. We find a statistically significant and robust link between fertility and the exchange rate. Our point-estimate is that a decline in the fertility rate of one child per woman is associated with a depreciation of approximately .15% in the real effective exchange rate.
|Date of creation:||Jul 2007|
|Date of revision:|
|Publication status:||published as Andrew K. Rose & Saktiandi Supaat & Jacob Braude, 2009. "Fertility and the real exchange rate," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 496-518, May.|
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