Currency Misalignments and Growth: A New Look using Nonlinear Panel Data Methods

Sophie Bereau (), Antonia Lopez-Villavicencio () and Valérie Mignon ()
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Sophie Bereau: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique
Antonia Lopez-Villavicencio: CEPN - Centre d'Economie de l'Université Paris Nord - CNRS - Centre National de la Recherche Scientifique - Université Sorbonne Paris Nord
Authors registered in the RePEc Author Service: Antonia López Villavicencio

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Abstract: The aim of this paper is to investigate the link between currency misalignments and economic growth. Relying on panel cointegration techniques, we calculate real exchange rate (RER) misalignments as deviations of actual RERs from their equilibrium values for a set of advanced and emerging economies. Estimating panel smooth transition regression models, we show that RER misalignments have a differentiated impact on economic growth depending on their sign: whereas overvaluations negatively affect economic growth, real exchange rate undervaluations significantly enhance it. This result indicates that undervaluations may drive the exchange rate to a level that encourages exports and promotes growth.

Keywords: Social; Sciences; &; Humanities (search for similar items in EconPapers)
Date: 2012
Note: View the original document on HAL open archive server: https://hal.science/hal-00709558v1
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Citations: View citations in EconPapers (30)

Published in Applied Economics, 2012, 44, pp.3503-3511. ⟨10.1080/00036846.2011.577022⟩

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Related works:
Journal Article: Currency misalignments and growth: a new look using nonlinear panel data methods (2012)
Working Paper: Currency Misalignments and Growth: a New Look Using Nonlinear Panel Data Methods (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00709558

DOI: 10.1080/00036846.2011.577022

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