Export concentration in developing countries: do real exchange rate misalignments matter?

Andrés Jung () and Silvia Vázquez ()
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Andrés Jung: Universidad Católica del Uruguay
Silvia Vázquez: Universidad Católica del Uruguay

International Economics and Economic Policy, 2023, vol. 20, issue 4, No 3, 563-593

Abstract: Abstract The purpose of this paper is to analyse the relation between real exchange rates (RER) misalignments and export concentration in developing countries. Particularly, we explore the relation between these variables in cases of episodes of profound over and undervaluation. The methodology is based on a dynamic model (2S-SGMM estimator) where the concentration of manufactured exports is explained by a lagged RER misalignment, conditional to a set of structural variables, for a panel data of 97 developing countries during 1991–2014. We find a significant relation between RER misalignments and export concentration in a subsequent period for countries in developing stages. Most interestingly, in cases involving episodes of deep RER misalignments, we find asymmetric results: a significant and positive relation between deep overvaluation episodes and export concentration in a subsequent period, but no significant relation in cases of episodes of deep undervaluation. While deep overvaluation episodes can hinder efforts for improving the structural factors underlying export diversification, episodes of deep undervaluation seemingly do not have a relevant influence.

Keywords: Real exchange rate; RER misalignment; Real overvaluation; Exports diversification; Developing countries (search for similar items in EconPapers)
JEL-codes: F19 F43 L6 O24 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10368-023-00569-6

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