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Infrastructures and the real exchange rate

Florian Morvillier

No 2020-26, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: This paper investigates the nonlinear relationship between infrastructures and the Real Effective Exchange Rate (REER). Applying a Panel Smooth Transition Regression (PSTR) model to a sample of 31 countries over the period 1973-2014, we find strong evidence of a nonlinear impact of Electricity Generating Capacity (EGC) and telecommunications on the REER dynamics. When the network is not completed or the stock of infrastructures is low, an increase in EGC and telecommunications depreciates the REER, while the additional depreciation is lower or inexistent once the network is established. Finally, turning to power grid quality, we show that higher electric power losses are associated with a REER depreciation that is particularly marked when the former are high.

Keywords: Infrastructures; Panel Smooth Transition Regression; Real Exchange Rate (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2020-26

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