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

Florencia Médici, Agustín Mario and Alejandro Fiorito
Additional contact information
Florencia Médici: Research Professors, Center for Studies of Political Economy and Development, National University of Moreno, Buenos Aires, Argentina
Agustín Mario: Research Professors, Center for Studies of Political Economy and Development, National University of Moreno, Buenos Aires, Argentina
Alejandro Fiorito: Research Professors, Center for Studies of Political Economy and Development, National University of Moreno, Buenos Aires, Argentina
Authors registered in the RePEc Author Service: Florencia Medici

Review of Keynesian Economics, 2021, vol. 9, issue 2, 253-269

Abstract: 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.

Keywords: exchange rate; autonomous demand; growth; Mexico; vector error-correction model (search for similar items in EconPapers)
JEL-codes: C32 E11 E12 E62 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.elgaronline.com/view/journals/roke/9-2/roke.2021.02.05.xml (application/pdf)
Restricted Access

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:rokejn:v:9:y:2021:i:2:p253-269

Access Statistics for this article

Review of Keynesian Economics is currently edited by Thomas Palley, Matías Vernengo and Esteban Pérez Caldentey

More articles in Review of Keynesian Economics from Edward Elgar Publishing
Bibliographic data for series maintained by Phillip Thompson ().