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Exchange rate volatility and productivity growth: The role of financial development

Philippe Aghion, Philippe Bacchetta (), Romain Rancière and Kenneth Rogoff ()
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Romain Rancière: CEPR - Center for Economic Policy Research - CEPR, IMF - International Monetary Fund - International Monetary Fund (IMF)

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Abstract: The vast empirical exchange rate literature finds the effect of exchange rate volatility on real activity to be small or insignificant. In contrast, this paper offers empirical evidence that real exchange rate volatility can have a significant impact on productivity growth. However, the effect depends critically on a country's level of financial development. The results appear robust to time window, alternative measures of financial development and exchange rate volatility, and outliers. We also offer a simple monetary growth model in which real exchange rate uncertainty exacerbates the negative investment effects of domestic credit market constraints.

Keywords: Exchange rate regime; Financial development and growth (search for similar items in EconPapers)
Date: 2009-05
Note: View the original document on HAL open archive server: https://hal-pjse.archives-ouvertes.fr/halshs-00754377
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Published in Journal of Monetary Economics, Elsevier, 2009, 56 (4), pp.494-513. 〈10.1016/j.jmoneco.2009.03.015〉

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Journal Article: Exchange rate volatility and productivity growth: The role of financial development (2009) Downloads
Working Paper: Exchange Rate Volatility and Productivity Growth: The Role of Financial Development (2009) Downloads
Working Paper: Exchange Rate Volatility and Productivity Growth: The Role of Financial Development (2006) Downloads
Working Paper: Exchange Rate Volatility and Productivity Growth: The Role of Financial Development (2006) Downloads
Working Paper: Exchange Rate Volatility and Productivity Growth: The Role of Financial Development (2006) Downloads
Working Paper: Exchange Rate Volatility and Productivity Growth: The Role of Financial Development (2006) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00754377

DOI: 10.1016/j.jmoneco.2009.03.015

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