International financial integration and real exchange rate long-run dynamics in emerging countries: Some panel evidence

Guglielmo Maria Caporale, Thouraya Hadj Amor and Christophe Rault

The Journal of International Trade & Economic Development, 2011, vol. 20, issue 6, 789-808

Abstract: The aim of this article is to provide new empirical evidence on the impact of international financial integration on the long-run Real Exchange Rate (RER) in 39 developing countries belonging to three different geographical regions (Latin America, Asia and MENA). It covers the period 1979--2004, and carries out ‘second-generation’ tests for non-stationary panels. Several factors, including international financial integration, are shown to drive the long-run RER in emerging countries. It is found that the new financial environment characterised by international financial integration leads to a depreciation of the RER in the long run. Further, RER misalignments take the form of an under-valuation in most MENA countries and an over-valuation in most Latin American and Asian countries.

Date: 2011
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Related works:
Working Paper: International Financial Integration and Real Exchange Rate Long-Run Dynamics in Emerging Countries: Some Panel Evidence (2009)
Working Paper: International Financial Integration and Real Exchange Rate Long-Run Dynamics in Emerging Countries: Some Panel Evidence (2009)
Working Paper: International Financial Integration and Real Exchange Rate Long-Run Dynamics in Emerging Countries: Some Panel Evidence (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:taf:jitecd:v:20:y:2011:i:6:p:789-808

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DOI: 10.1080/09638190903365948

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