Exchange Rate Misalignment and Growth: A Myth?

December 21, 2017

Preview Citation

Format: Chicago

Carlos Goncalves, and Mauro Rodrigues. Exchange Rate Misalignment and Growth: A Myth?, (USA: International Monetary Fund, 2017) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The impact of real exchange rate movements on GDP growth is a hotly debated issue both in policy and academic circles. In this paper, we provide evidence suggesting that the association between exchange rate misalignment and growth for a broad panel of countries is very weak. Controlling for country fixed effects, time effects and initial GDP, a more depreciated currency is associated with higher growth if one does not exclude outliers. However, this positive association always vanishes after controling for the savings rate. Importantly, this applies for both a large panel of countries and for the emerging economies subsample.

Subject: Currencies, Exchange rates, Real exchange rates

Keywords: Exchange rate-growth nexus, WP

Publication Details

Pages:

15
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/283
Stock No:

WPIEA2017283
ISBN:

9781484330135
ISSN:

1018-5941

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