Going under to stay on top: How much real exchange rate undervaluation is needed to boost growth in developing countries
Abstract: This paper explores the real exchange rate (RER)-economic growth relationship for a wide sample of countries over the period 1960-2009. After removing influential observations, the system-GMM estimates suggest a positive link between an undervalued RER and growth in non-industrial countrie...
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| Autores principales: | , |
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| Lenguaje: | English |
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Universidad de Chile. Departamento de Economía
2018
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| Materias: | |
| Acceso en línea: | http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-52862018000100005 |
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| Sumario: | Abstract: This paper explores the real exchange rate (RER)-economic growth relationship for a wide sample of countries over the period 1960-2009. After removing influential observations, the system-GMM estimates suggest a positive link between an undervalued RER and growth in non-industrial countries, particularly in those with upper-middle and high income levels. In turn, RER volatility is found harmful for growth. These results holds when testing for asymmetric effects of RER misalignment: a real undervaluation boosts growth in non-industrial countries, while overvaluation seems to have no effects at any income level. Besides, the magnitude of the misalignment is also relevant: an undervalued RER of about 26% on average has a positive impact on growth. |
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