Real exchange rate misalignments and economic performance for the G20 countries

Audrey Sallenave

No 2010-1, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: We evaluate the growth effects of real effective exchange rate misalignments for the G20 countries over the period 1980-2006. To this end, we first estimate real effective equilibrium exchange rates relying on the behavioral approach BEER, from which misalignments are derived. Second, we estimate a dynamic panel growth model in which among the traditional determinants of growth, our measure of misalignments is included. Our findings put forward some important differences between developed and emerging economies. The magnitude of the misalignments is more pronounced in the case of emerging countries, and the speed of convergence towards the estimated equilibrium exchange rate is slower for industrialized ones. Turning to our growth regression analysis, we find that misalignments have a negative effect on the economic growth. As a consequence, an appropriate exchange rate policy would close the gap between real exchange rates and their equilibrium level.

Keywords: Equilibrium Real Effective Exchange Rate; Group of Twenty; Growth; Misalignments; Panel Cointegration (search for similar items in EconPapers)
JEL-codes: C23 F31 O47 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2010
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-ifn and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2010-1

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