International Financial Integration and Real Exchange Rate Long-Run Dynamics in Emerging Countries: Some Panel Evidence

Guglielmo Maria Caporale, Thouraya Hadj Amor Essid () and Christophe Rault
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Thouraya Hadj Amor Essid: Monastir University

No 4038, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The aim of this paper is to provide new empirical evidence on the impact of international financial integration on the long-run Real Exchange Rate (RER) in 39 developing countries belonging to three different geographical regions (Latin America, Asia and MENA). It covers the period 1979-2004, and carries out “second-generation” tests for non-stationary panels. Several factors, including international financial integration, are shown to drive the long-run RER in emerging countries. It is found that the new financial environment characterised by international financial integration leads to a depreciation of the RER in the long run. Further, RER misalignments take the form of an under-valuation in most MENA countries and an over-valuation in most Latin American and Asian countries.

Keywords: financial integration; real exchange rate; second-generation panel unit root and cointegration tests; misalignment; emerging economies (search for similar items in EconPapers)
JEL-codes: C15 E31 F0 F31 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2009-02
New Economics Papers: this item is included in nep-ara, nep-opm and nep-sea
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Citations: View citations in EconPapers (3)

Published - published in: Journal of International Trade and Economic Development, 2011, 20 (6), 789 - 808

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Related works:
Journal Article: International financial integration and real exchange rate long-run dynamics in emerging countries: Some panel evidence (2011)
Working Paper: International Financial Integration and Real Exchange Rate Long-Run Dynamics in Emerging Countries: Some Panel Evidence (2009)
Working Paper: International Financial Integration and Real Exchange Rate Long-Run Dynamics in Emerging Countries: Some Panel Evidence (2009)
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