Exchange Rate Volatility Effect on Economic Growth under Different Exchange Rate Regimes: New Evidence from Emerging Countries Using Panel CS-ARDL Model

Karim Ameziane () and Bouchra Benyacoub
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Karim Ameziane: Laboratory LIREFIMO, Faculty of Law, Economics and Social Sciences, Sidi Mohamed Ben Abdellah University, Fez 30050, Morocco
Bouchra Benyacoub: Laboratory LIREFIMO, Faculty of Law, Economics and Social Sciences, Sidi Mohamed Ben Abdellah University, Fez 30050, Morocco

JRFM, 2022, vol. 15, issue 11, 1-20

Abstract: This paper analyzes the impact of exchange rate volatility on economic growth under various exchange rate regimes. It empirically examines this issue in 14 emerging countries from 1990 to 2020. This study has three particularities: First, we use the GARCH model to generate the conditional variance, which will be used as a proxy variable for the exchange rate volatility. Second, to address our issue, we employ the Panel CS-ARDL model, one of the most recent models for handling panel cases. Third, we apply the Dumitrescu and Hurlin Granger non-causality test to capture the potential indirect effect that exchange rate volatility can have on economic growth through the channel of its determinants. The results of our study demonstrate that exchange rate volatility costs emerging countries both directly and indirectly in terms of growth. However, by controlling our countries according to the adopted exchange rate regime, we find that the magnitude of this impact tends to be stifled in the case of countries adopting intermediate exchange rate regimes. Through their combination of rigidity and flexibility, intermediate exchange rate regimes appear to be more effective in mitigating the direct effects of exchange rate volatility on economic growth.

Keywords: exchange rate regimes; economic growth; exchange rate volatility; emerging countries; GARCH model; CS-ARDL model; panel data (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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