Exchange Rate Misalignment and Growth: A Myth?

Carlos Goncalves and Mauro Rodrigues

No 2017/283, IMF Working Papers from International Monetary Fund

Abstract: The impact of real exchange rate movements on GDP growth is a hotly debated issue both in policy and academic circles. In this paper, we provide evidence suggesting that the association between exchange rate misalignment and growth for a broad panel of countries is very weak. Controlling for country fixed effects, time effects and initial GDP, a more depreciated currency is associated with higher growth if one does not exclude outliers. However, this positive association always vanishes after controling for the savings rate. Importantly, this applies for both a large panel of countries and for the emerging economies subsample.

Keywords: WP; exchange rate-growth nexus (search for similar items in EconPapers)
Pages: 15
Date: 2017-12-21
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Citations: View citations in EconPapers (13)

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Working Paper: Exchange Rate Misalignment and Growth: A Myth? (2017)
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