scholarly journals The Real Exchange Rate and Economic Growth: Revisiting the Case Using External Instruments

2016 ◽  
Author(s):  
Maurizio Michael Habib ◽  
Elitza Mileva ◽  
Livio Stracca
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
The Real

Questioning the effect of the real exchange rate on growth: new evidence from Mexico

2021 ◽  
Vol 9 (2) ◽  
pp. 253-269
Author(s):  
Florencia Médici ◽  
Augustín Mario ◽  
Alejandro Fiorito
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Public Expenditure ◽  
Institutional Arrangements ◽  
Relative Price ◽  
The Real ◽  
Empirical Results ◽  
New Evidence

This study provides new evidence showing that the real exchange rate (RER) does not play an important role in the growth of Mexican GDP. Economic growth is not an automatically predetermined result of relative price correction, and it is important to consider distinctive aspects of national institutional arrangements (fiscal and monetary, for example) for understanding theoretical causality of demand. The empirical results show public expenditure is an overlooked variable in regressions where the exchange rate affects product growth. After incorporating public expenditure, the RER impact on growth becomes insignificant. For its part, public expenditure has a positive and significant effect on GDP in the long term. The RER does not lead to greater GDP since exports are not stimulated through price.

scholarly journals Real exchange rate behaviour and economic growth: evidence from Sierra Leone

2011 ◽  
Vol 13 (1) ◽  
pp. 8-25 ◽  
Author(s):  
Abu Tarawalie
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Sierra Leone ◽  
Real Effective Exchange Rate ◽  
Causality Test ◽  
The Real ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Impact

The main focus of this paper is to examine the impact of the real effective exchange rate on economic growth in Sierra Leone. First an analytical framework is developed to identify the determinants of the real effective exchange rate. Using quarterly data and employing recent econometric techniques, the relationship between the real effective exchange rate and economic growth is then investigated. A bivariate Granger causality test was also employed as part of the methodology to examine the causal relationship between the real exchange rate and economic growth. The empirical results suggest that the real effective exchange rate correlates positively with economic growth, with a statistically significant coefficient. The results also indicate that monetary policy is relatively more effective than fiscal policy in the long run, and evidence of the real effective exchange rate causing economic growth was profound. In addition, the results showed that terms of trade, exchange rate devaluation, investment to GDP ratio and an excessive supply of domestic credit were the main determinants of the real exchange rate in Sierra Leone.

scholarly journals The Effect of Exchange Rate Movements and Economic Growth on Job Creation

2017 ◽  
Vol 62 (2) ◽  
pp. 20-41
Author(s):  
Chama Chipeta ◽  
Daniel Francois Meyer ◽  
Paul-Francois Muzindutsi
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Job Creation ◽  
Vector Autoregressive ◽  
The Real ◽  
Long Run ◽  
Exchange Rate Shocks ◽  
The Impact

Abstract Job creation is at the centre of economic development and remains a source of sustenance for social and human relations. The creation of a job-enabling economic environment is imperative in promoting social and economic cohesiveness in the macro and microeconomic environment. Any shocks to the economy, particularly those of exchange rate shocks and changes in economic growth, may negatively affect the labour market and job creation. This study made use of quarterly observations, from the first quarter of 1995 to the fourth quarter of 2015, to investigate the effect of the real exchange rate and economic growth on South Africa’s employment status. South Africa, a developing country, was selected as a case study due to its high unemployment rate that is still increasing. The Vector Autoregressive (VAR) model and multivariate co-integration techniques were used in assessing the impact and responsiveness of employment to the real exchange rate and real economic growth in South Africa. Findings of this study revealed that employment responds positively to economic growth and negatively to the real exchange rate in the long-run. The short-run displays a positive relationship between real economic growth and employment, while the relationship between employment and the real exchange rate is also negative. However, the effect of economic growth in creating jobs is not significant enough in stimulating job creation in South Africa, as indicated by results in variance decomposition. Movements in the exchange rate exerted a significant short and long-run negative effect on employment dynamics; implying that a depreciation of the rand against the U.S. dollar is associated with decrease in overall employment. Exchange rate stability is thus important for economic growth and job creation in South Africa. The study provided further recommendations on promoting job creation in South Africa and other developing countries.

scholarly journals How is the dynamic impact of Undervaluation on Economic Growth in Latin American Countries?: A Panel VAR analysis

2020 ◽  
Author(s):  
CESAR CHAVEZ
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Latin American ◽  
Panel Var ◽  
Causality Test ◽  
Vector Autoregressive ◽  
The Real ◽  
Per Capita ◽  
Latin American Countries

Abstract In this research, I analyze the dynamic effects of undervaluation on the economic growth per captai of Latin American countries with a period 1980-2018. To estimate these effects, I use a Panel Vector Autoregressive (PVAR) whose estimator is System GMM. The undervaluation variable is created from different measures of the real exchange rate and I also use various measures of GDP per capita to calculate economic growth per capita. I include as control variables macroeconomic and human capital variables to control the different channels of spread of undervaluation on economic growth per capita. The results show that there is a positive effect depending on the definition of the real exchange rate used to calculate the undervaluation. In the results I include the Granger causality test, stability test and impulse response graphs in which I project the response of per capita economic growth to an undervaluation shock.

Investigating the Relationship between Trade Balance and the Exchange Rate: The Case of Laos’ Trade with Thailand

2018 ◽  
Vol 19 (3) ◽  
pp. 590-603 ◽  
Author(s):  
Phouphet Kyophilavong ◽  
Muhammad Shahbaz ◽  
Ijaz Ur Rehman ◽  
Somchith Souksavath ◽  
Sengchanh Chanthasene
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Trade Policy ◽  
Real Exchange Rate ◽  
Trade Balance ◽  
The Real ◽  
J Curve ◽  
The Exchange Rate ◽  
The Relationship

We investigate the nexus between Laos’ trade balance and its real exchange rate with Thailand. We apply the combined cointegration approach and find that the trade balance and the real exchange rate have cointegration. The devaluation of Laos’ Kip improves the trade balance, but there is no evidence of the J-curve phenomenon. Laos’s economic growth causes its trade balance to deteriorate. A rise in Thai income increases the trade balance of Laos. This study presents new insights for policymakers who seek to sustain trade with Thailand by designing a comprehensive trade policy.

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