The Real Exchange Rate And Growth Revisited
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The Real Exchange Rate And Growth Revisited
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Author : Yanliang Miao
language : en
Publisher: International Monetary Fund
Release Date : 2010-03-01
The Real Exchange Rate And Growth Revisited written by Yanliang Miao and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-03-01 with Business & Economics categories.
There is good reason and much evidence to suggest that the real exchange rate matters for economic growth, but why? The "Washington Consensus" (WC) view holds that real exchange rate misalignment implies macroeconomic imbalances that are themselves bad for growth. In contrast, Rodrik (2008) argues that undervaluation relative to purchasing power parity is good for growth because it promotes the otherwise inefficiently small tradable sector. Our main result is that WC and the Rodrik views of the role of misalignment in growth are observationally equivalent for the main growth regressions he reports. There is an identification problem: Determinants of misalignment are also likely to be independent drivers of growth, and these types of growth regressions are hard-pressed to disentangle the different channels. However, we confirm that not only are overvaluations bad but undervaluations are also good for growth, a result squarely consistent with the Rodrik story but one that requires some gymnastics from the WC viewpoint.
When And Why Worry About Real Exchange Rate Appreciation The Missing Link Between Dutch Disease And Growth
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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 2010-12-01
When And Why Worry About Real Exchange Rate Appreciation The Missing Link Between Dutch Disease And Growth written by International Monetary Fund and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-12-01 with Business & Economics categories.
We review the literature on Dutch disease, and document that shocks that trigger foreign exchange inflows (such as natural resource booms, surges in foreign aid, remittances, or capital inflows) appreciate the real exchange rate, generate factor reallocation, and reduce manufacturing output and net exports. We also observe that real exchange rate misalignment due to overvaluation and higher volatility of the real exchange rate lower growth. Regarding the effect of undervaluation of the exchange rate on economic growth, the evidence is mixed and inconclusive. However, there is no evidence in the literature that Dutch disease reduces overall economic growth. Policy responses should aim at adequately managing the boom and the risks associated with it.
The Transfer Problem Revisited
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Author : Mr.Gian Milesi-Ferretti
language : en
Publisher: INTERNATIONAL MONETARY FUND
Release Date : 2000-07-01
The Transfer Problem Revisited written by Mr.Gian Milesi-Ferretti and has been published by INTERNATIONAL MONETARY FUND this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000-07-01 with Business & Economics categories.
The relationship between international payments and the real exchange rate—the “transfer problem”—is a classic question in international economics. We use new data on countries’ net external positions together with real exchange rate data to shed light on this question. We present a model yielding testable implications on the long-run co-movements of real exchange rates, external positions, relative GDP and terms of trade, and cross-country and time-series evidence on the subject. Countries with net external liabilities are found to have more depreciated real exchange rates, with the main channel of transmission working through the relative price of nontraded goods.
Targeting The Real Exchange Rate
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Author : Mr.Guillermo Calvo
language : en
Publisher: International Monetary Fund
Release Date : 1994-02-01
Targeting The Real Exchange Rate written by Mr.Guillermo Calvo and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994-02-01 with Business & Economics categories.
This paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate. An intertemporal optimizing model suggests that, in the absence of changes in fiscal policy, a more depreciated level of the real exchange can only be attained temporarily. This can be achieved by means of higher inflation and/or higher real interest rates, depending on the degree of capital mobility. Evidence for Brazil, Chile, and Colombia supports the model’s prediction that undervalued real exchange rates are associated with higher inflation.
Real Exchange Rates Saving And Growth
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Author : Peter J. Montiel
language : en
Publisher: World Bank Publications
Release Date : 2008
Real Exchange Rates Saving And Growth written by Peter J. Montiel and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Currencies and Exchange Rates categories.
Abstract: The view that policies directed at the real exchange rate can have an important effect on economic growth has been gaining adherents in recent years. Unlike the traditional "misalignment" view that temporary departures of the real exchange rate from its equilibrium level harm growth by distorting a key relative price in the economy, the recent literature stresses the growth effects of the equilibrium real exchange rate itself, with the claim being that a depreciated equilibrium real exchange rate promotes economic growth. While there is no consensus on the precise channels through which this effect is generated, an increasingly common view in policy circles points to saving as the channel of transmission, with the claim that a depreciated real exchange rate raises the domestic saving rate - which in turn stimulates growth by increasing the rate of capital accumulation. This paper offers a preliminary exploration of this claim. Drawing from standard analytical models, stylized facts on saving and real exchange rates, and existing empirical research on saving determinants, the paper assesses the link between the real exchange rate and saving. Overall, the conclusion is that saving is unlikely to provide the mechanism through which the real exchange rate affects growth.
Does Productivity Growth Lead To Appreciation Of The Real Exchange Rate
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Author : Man-Keung Tang
language : en
Publisher: International Monetary Fund
Release Date : 2003-07-01
Does Productivity Growth Lead To Appreciation Of The Real Exchange Rate written by Man-Keung Tang and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-07-01 with Business & Economics categories.
We revisit the time-honored link between productivity and the real exchange rate. Consistent with the traditional view, we find that higher labor productivity tends to lead to appreciation of the real exchange rate. Contrary to the traditional view, however, we find that the positive productivity effect is transmitted through the real exchange rate based on tradable prices, rather than through relative prices between tradables and nontradables. Moreover, higher total factor productivity is found, if anything, to lead to depreciation of the real exchange rate. These last two pieces of evidence provide support for the emerging view that limited tradability of goods and services provides scope for the strategic pricing decision, which has material consequences for the aggregate real exchange rate.
Fundamental Determinants Of Exchange Rates
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Author : Jerome L. Stein
language : en
Publisher: Oxford University Press
Release Date : 1997
Fundamental Determinants Of Exchange Rates written by Jerome L. Stein and has been published by Oxford University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997 with Business & Economics categories.
Neo-classical in its stress on fundamentals that drive a real economy, this study also offers an alternative paradigm to describe and explain short-run movements of nominal exchange rates.
Real Exchange Rates Economic Complexity And Investment
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Author : Steve Brito
language : en
Publisher: International Monetary Fund
Release Date : 2018-05-10
Real Exchange Rates Economic Complexity And Investment written by Steve Brito and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-05-10 with Business & Economics categories.
We show that the response of firm-level investment to real exchange rate movements varies depending on the production structure of the economy. Firms in advanced economies and in emerging Asia increase investment when the domestic currency weakens, in line with the traditional Mundell-Fleming model. However, in other emerging market and developing economies, as well as some advanced economies with a low degree of structural economic complexity, corporate investment increases when the domestic currency strengthens. This result is consistent with Diaz Alejandro (1963)—in economies where capital goods are mostly imported, a stronger real exchange rate reduces investment costs for domestic firms.
Real Exchange Rates And Fundamentals
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Author : Luca Antonio Ricci
language : en
Publisher: International Monetary Fund
Release Date : 2008
Real Exchange Rates And Fundamentals written by Luca Antonio Ricci and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Business & Economics categories.
This paper employs newly constructed measures for productivity differentials, external imbalances, and commodity terms of trade to estimate a panel cointegrating relationship between real exchange rates and a set of fundamentals for a sample of 48 industrial countries and emerging markets. It finds evidence of a strong positive relation between the CPI-based real exchange rate and commodity terms of trade. The estimated impact of productivity growth differentials between traded and nontraded goods, while statistically significant, is small. Increases in net foreign assets and in government consumption tend to be associated with appreciating real exchange rates.
Real Exchange Rates And The Prices Of Nontradable Goods
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Author : Mr.Gian Milesi-Ferretti
language : en
Publisher: International Monetary Fund
Release Date : 1994-02-01
Real Exchange Rates And The Prices Of Nontradable Goods written by Mr.Gian Milesi-Ferretti and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994-02-01 with Business & Economics categories.
This paper attempts to provide a perspective on real exchange rate developments following the inception of the EMS. The focus is on structural determinants of real exchange rates, notably the behavior of tradables and nontradable prices and productivity. It is found that changes in the relative price of tradable goods in terms of nontradables account for a sizable fraction of real exchange rate dynamics during the EMS period. Sectoral productivity growth differential help explain the behavior of the relative price of tradable goods, especially in the long run. There is also some evidence that the EMS has extended on relative price behavior.