Currency Devaluation and Output Growth in Asia

Shu-Ching Huang (), Chao-Min Hsu and Ming-Hsein Kang
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Shu-Ching Huang: Department of International Trade, Kun Shan University, Taiwan
Chao-Min Hsu: Department of International Trade, Kun Shan University, Taiwan
Ming-Hsein Kang: Department of Finance Banking, Kun Shan University, Taiwan

Journal of Economics and Management, 2010, vol. 6, issue 1, 113-131

Abstract: According to the traditional theory, it is expected that depreciation in domestic currency generally decreases the relative price of domestically produced goods and thereby stimulates demand for domestic export. Hence, currency depreciation can be expected to have expansionary effects on real output in Asia. But there is now enough studies evidence that currency devaluation can lead to lower rates of economic growth. So this study use more rigorous empirical model and econometric methodology examines the effect of currency devaluation on output expansion in Asian countries. The empirical results finds it depreciation exerts a positive impact on output growth in Asian countries.

Keywords: contractionary devaluations; heterogeneous panel cointegration tests; full modified OLS; dynamic OLS (search for similar items in EconPapers)
JEL-codes: C23 F31 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:jec:journl:v:6:y:2010:i:1:p:113-131

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