The Effects of Exchange Rate Fluctuationson Output and Prices: Evidence From Developing Countries

Magda Kandil and Ida Mirzaie ()

No 2003/200, IMF Working Papers from International Monetary Fund

Abstract: The paper examines the effects of exchange rate fluctuations on real output and the price level in a sample of 33 developing countries. The theoretical model decomposes movements in the exchange rate into anticipated and unanticipated components. Unanticipated currency fluctuations help to determine aggregate demand through exports, imports, and the demand for domestic currency, and aggregate supply through the cost of imported intermediate goods. Anticipated exchange rate depreciation, through the supply channel, has limited effects on output growth and inflation. Unanticipated currency fluctuations appear more significant, with varying effects on output growth and price inflation across developing countries.

Keywords: WP; currency appreciation; price inflation; aggregate demand; exchange rate; anticipated vs. unanticipated appreciation; supply vs. demand channels; real and inflationary effects; exchange rate fluctuation; energy price; error correction term; currency depreciation; output price; price deflation; Fluctuationson output; money supply; price surprise; production function; energy price increase; Exchange rates; Currencies; Inflation; Real exchange rates; Energy pricing (search for similar items in EconPapers)
Pages: 32
Date: 2003-10-01
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Citations: View citations in EconPapers (12)

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Journal Article: The Effects of Exchange Rate Fluctuations on Output and Prices: Evidence from Developing Countries (2004)
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