scholarly journals How frequent a BEER? Assessing the impact of data frequency on real exchange rate misalignment estimation

2021 ◽  
Author(s):  
Claire Giordano
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Exchange Rate Misalignment ◽  
Data Frequency ◽  
The Impact

scholarly journals Exchange Rate Misalignment and Economic Growth in Pakistan: The Role of Financial Development

2020 ◽  
Vol 59 (1) ◽  
pp. 81-99
Author(s):  
Zainab Jehan ◽  
Iffat Irshad
Keyword(s):  
Economic Growth ◽  
Time Series ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Financial Development ◽  
Adverse Impact ◽  
Series Data ◽  
Development Economic ◽  
Exchange Rate Misalignment ◽  
The Impact

This study endeavours to examine empirically how real exchange rate (RER) misalignment affects economic growth in Pakistan. In this regard, we have not only estimated the direct impact but also the indirect impact of misalignment on economic growth by using the financial development channel. We have used time series data ranging from 1980 to 2016 to carry out the empirical analysis. After testing the time series properties of the selected variables, we computed long run equilibrium RER later used to calculate RER misalignment. Finally, we estimated the impact of misalignment on per capita economic growth, both direct and indirect. Our results reveal an adverse impact of RER misalignment on economic growth. However, we report that financial development helps in minimising the adverse impact of RER misalignment, though not fully eliminating it. Based on the empirical findings, the study suggests that exchange rate policies need to be managed more cautiously. Moreover, the financial sector development needs to be strengthened which may help in fully alleviating the adverse impact of RER misalignment on economic growth. JEL Classification: F31, GOO, O47 Keywords: Real Exchange Rate Misalignment, Financial Development, Economic Growth, FMOLS

scholarly journals The Impact of Currency Misalignment on Trade Balance of Emerging Market Economies

2021 ◽  
Vol 12 (2) ◽  
pp. 285-304
Author(s):  
Abdullahil Mamun ◽  
Emrah Eray Akça ◽  
Harun Bal
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Trade Balance ◽  
Emerging Market ◽  
Emerging Market Economies ◽  
Method Of Moment ◽  
Market Economies ◽  
Exchange Rate Misalignment ◽  
The Impact ◽  
Currency Misalignment

This study is an attempt to examine the impact of currency misalignment on the trade balance of emerging market economies from 1980 through 2016. It firstly measures the equilibrium RER and corresponding misalignment series of 21 EMEs separately adopting a single equation approach and then includes them in the trade regression together with undervaluation and overvaluation to estimate the dynamic relationship between the trade balance and real exchange rate misalignment employing the system generalized method of moment estimation approach. The study suggests that, being a composite series of undervaluation and overvaluation, higher real exchange rate misalignment helps recover trade imbalances. It also identifies that undervaluation improves trade balance, while overvaluation cuts it down. The study identifies that the misalignment series of RER for most of the EMEs are substantially dominated by overvaluation episodes, and hence the opposing impact of undervaluation and currency misalignment on the trade balance of EMEs is not surprising. From the policy perspective, competitiveness achieved through currency movements helps emerging market economies not only to improve trade balance but also to withstand vulnerability that arises from huge external borrowings creating a strong external payment position.

Exchange rate misalignment and economic growth in India

2017 ◽  
Vol 9 (4) ◽  
pp. 414-434
Author(s):  
Vaseem Akram ◽  
Badri Narayan Rath
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Structural Break ◽  
Annual Data ◽  
Content Type ◽  
Distributed Lag ◽  
Exchange Rate Misalignment ◽  
The Exchange Rate ◽  
The Impact

Purpose The purpose of the paper is to examine the impact of exchange rate misalignment on economic growth in India using annual data from 1980 to 2014. Design/methodology/approach First, misalignment is measured, which is defined as the deviations of the actual real exchange rate (RER) from its equilibrium level. The equilibrium real exchange rate (ERER) is estimated using the auto-regressive distributed lag (ARDL) model by considering key macroeconomic fundamentals of the determinants of RER. Zivot and Andrews’ unit root with structural break is used to test the stationarity property of data. The impact of exchange rate misalignment on economic growth has been examined using ARDL and variance decomposition techniques. Findings Our results find an overvaluation of the exchange rate till 2000, and thereafter, an undervaluation of the exchange rate prevails in India. Further, the result indicates that an increase in exchange rate misalignment leads to a decrease in economic growth and vice versa. Moreover, a positive misalignment (overvaluation) hurts the economic growth and a negative misalignment (undervaluation) promotes the economic growth. Research limitations/implications From the policy perspective, the results highlight that India needs to maintain an appropriate exchange rate which can reduce the RER misalignment. It is better for the Reserve Bank of India (RBI)’s intervention to smoothen the fluctuations of the exchange rate to avoid the inefficiency in the allocation of resources. However, to minimize the RER misalignment, the intervention should be conducted only in the short run. Originality/value The study contributes to the existing literature by estimating the exchange rate misalignment for India and its impact on economic growth.

Real exchange rate misalignment and economy

2019 ◽  
Vol 46 (1) ◽  
pp. 211-227 ◽  
Author(s):  
Hock Tsen Wong
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Manufacturing Sector ◽  
Economic Sectors ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Exchange Rate Misalignment ◽  
Productivity Differential ◽  
The Impact

PurposeThe purpose of this paper is to examine the impact of real exchange rate misalignment on economy and economic sectors, namely construction, manufacturing and mining and quarrying in Malaysia.Design/methodology/approachThe equilibrium real exchange rate and economic models are estimated using the autoregressive distributed lag approach.FindingsAn increase in productivity differential or reserve differential will lead to an appreciation of real exchange rate in the long run. An increase in positive (negative) real exchange rate misalignment will lead to an increase (decrease) in economy. An increase in long-run real exchange rate misalignment will lead to a decrease in economy. Real exchange rate misalignment or long-run real exchange rate misalignment can influence the manufacturing sector in Malaysia. More specifically, undervaluation will promote whereas overvaluation will hurt the manufacturing sector.Originality/valueReal exchange rate misalignment can be a policy to influence economy but may not be the best choice.

Open Door System and Endogenous Growth in Indian Economy: An Empirical Analysis on the Role of Human Capital and R&D in Explaining Industrial Productivity

2021 ◽  
Vol 46 (1) ◽  
pp. 24-37
Author(s):  
Arjun K. ◽  
Sanjay Kumar ◽  
A. Sankaran ◽  
Mousumi Das
Keyword(s):  
Human Capital ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Endogenous Growth ◽  
Value Added ◽  
Capital Formation ◽  
Knowledge Capital ◽  
Test Technique ◽  
Long Run ◽  
The Impact

The present study investigates the impact of human capital, knowledge capital which is a function of human capital, and real exchange rate scenario in explaining long-run industrial total factor productivity (TFP) from 1980 to 2015 on the theoretical basis of the open endogenous growth model. The variables employed in the contemporary study include manufacturing value added (MNVA) as industrial output measure, gross fixed capital formation (GFCF) as a measure of capital and labour input which is measured using employment data. Gross enrolment ratio (GER) is taken as a measure for human capital formation, expenditure on research and development (R&D) as a proxy for knowledge capital, and real exchange rate indicates global economic shocks. The study involves estimating TFP for Industrial Sector during the post-liberalization period by employing Cobb-Douglas production function. The ARDL bounds test technique for cointegration revealed long-run relation among the varying factors studied. The Toda-Yamamoto causality test concluded bi-directional causality running between, R&D expenditure and Industrial TFP which sends a strong signal to the policymakers for a well-framed long-term integrated approach for human & knowledge capital formation which will act as a strong impetus for manufacturing firms to come up in terms of augmenting production and productivity and expanding foreign market horizon. JEL Classification: D24, E2, J24

scholarly journals The Impact of Real Exchange Rate Undervaluation on Economic Growth: Evidence from Panel Cointegration Approach

2020 ◽  
Author(s):  
Mehdi Seraj ◽  
Cagay Coskuner ◽  
Seyi Saint Akadiri ◽  
Negar Bahadori
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Developing Economies ◽  
Panel Cointegration ◽  
Least Square ◽  
Ordinary Least Square ◽  
Developed Economies ◽  
Periodic Data ◽  
The Impact

Abstract This study revisited Dani Rodrik (2008) work on real exchange rate undervaluation and economic growth by using the Fully Modified Ordinary Least Square (FMOLS) and Dynamic Ordinary Least Square (DOLS). This research, to the best of authors' knowledge, is the first to use FMOLS and DOLS approach to empirically evaluate Rodrik work on the real exchange rate and economic growth using a Panel periodic data (six sets of five years) of 82 countries throughout 1990 to 2018. We used the Balassa Samuelson method to estimate the predicted real exchange rate and real exchange rate undervaluation. Finally, the study is in support of Rodrik conclusion that, real exchange undervaluation has a significant impact on the economic growth of the developing economies and statistically insignificant in the developed economies.

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