Exchange Rate Movements and Economic Activity

Marion Kohler, Joseph Manalo and Dilhan Perera
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Joseph Manalo: Reserve Bank of Australia
Dilhan Perera: Reserve Bank of Australia

RBA Bulletin (Print copy discontinued), 2014, 47-54

Abstract: This article discusses estimates of the effect of movements in the real exchange rate on economic activity and inflation in Australia. The range of estimates suggests that a temporary 10 per cent depreciation of the exchange rate increases the level of GDP temporarily by ¼–½ per cent over one to two years. A permanent 10 per cent real depreciation is estimated to increase the level of GDP by around 1 per cent after two to three years and to increase year-ended inflation by ¼–½ percentage point over the same period. At an industry level, unsurprisingly, activity in trade-exposed industries is found to be more affected than in domestically oriented industries.

Keywords: exchange rate; GDP; industry output (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (5)

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