Exchange Rate Regimes and Economic Growth in Developing Countries: An Empirical Study Using Panel Data from 1980 to 2013

Zeyneb Guellil, Fatima Zohra Marouf and Mohamed Benbouziane ()
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Zeyneb Guellil: Tlemcen University, Abou Bekr Belkaid, Economics and Management, Algeria
Fatima Zohra Marouf: Umons, Warocqué, Belgium

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Abstract: The ideal exchange rate regime is a crucial element in the process of directing economic policies in any country because of its impact on economic performance. It plays a clear role in determining the ability of the economy to face many crises and shocks, whether real or financial, and achieve good growth rates that push the economy forward. The exchange rate regimes are an element of modern financial thinking because they are important in adjusting and settling the balance of payments and maintaining the stability of economic growth rates in developing countries, which are characterized by chronic structural deficit according to the macroeconomic policies in the field of development. The exchange rate regimes included several ratings ranged from the official classification of the IMF to de jure, which expressed what governments officially declare in relation to their exchange rate regimes, and the actual de facto classification that countries actually apply. Governments may announce their adoption of an exchange rate regime In practice, while in practice it is applying another regime, his is due to several reasons, including the fear of floating. Some countries may officially declare their adoption of floating exchange rate regimes, but they are actually adopting the fixed exchange systems for fear of the effects of floating exchange rate or so-called fear of floating, which is often accompanied by a decrease in the value of the currency (Calvo and Reinhart). So, one of the most important aspects of choosing exchange rate regime is its impact on economic growth. Thus, the main concern of this paper is to examine the impact of the exchange rate regimes on economic growth in developing countries. Through exposure to the various theoretical and empirical literature that addressed the subject. In order to achieve this target, we used an econometric study using time-series data (Panel Data), a sample consisting of about 38 developing countries during the period from 1980 to 2013 relying on two types of exchange rate regimes: fixed and intermediate regimes according to the new classification of Reinhart and Rogoff (2008 and 2010).To estimate this model was used the Panel Fully Modified Least Squares (FMOLS) in order to know any regimes is the best in terms of economic growth. Our results suggest that there is a positive relation between exchange rate regime and economic growth with a preference for fixed exchange rate regimes in achieving the highest growth rate.

Keywords: Exchange rate regime; Economic growth; Classifications of exchange rate regimes; Panel data; abstract (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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