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Fear of appreciation

Levy-Yeyati, Eduardo, Federico Sturzenegger and Pablo Gluzmann ()
Authors registered in the RePEc Author Service: Eduardo Levy Yeyati ()

Journal of Development Economics, 2013, vol. 101, issue C, 233-247

Abstract: In recent years, the term “fear of floating” has been used to describe exchange rate regimes that, while officially flexible, in practice intervene heavily to avoid sudden or large depreciations. However, the data reveals that in most cases (and increasingly so in the 2000s) intervention has been aimed at limiting appreciations rather than depreciations, often motivated by the neo-mercantilist view of a depreciated real exchange rate as protection for domestic industries. As a first step to address the broader question of whether this view delivers on its promise, we examine whether this “fear of appreciation” has a positive impact on growth performance in developing economies. We show that depreciated exchange rates indeed lead to higher growth, but that the effect, rather than through import substitution or export booms as argued by the mercantilist view, works largely through the deepening of domestic savings and capital accumulation.

Keywords: Exchange rate regimes; Fear of floating; Economic growth; Real exchange rates (search for similar items in EconPapers)
JEL-codes: F31 F33 F36 (search for similar items in EconPapers)
Date: 2013
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Related works:
Working Paper: Fear of Appreciation (2012) Downloads
Working Paper: Fear of Appreciation (2007) Downloads
Working Paper: Fear of Appreciation (2007) Downloads
Working Paper: Fear of appreciation (2007) Downloads
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