Modelling Real Exchange Rate Effects on Output Performance in Latin America

P Mejía-Reyes, Denise Osborn and Marianne Sensier ()

Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester

Abstract: This paper empirically analyses real per capita GDP growth for six Latin American countries (Argentina, Brazil, Chile, Columbia, Mexico, Venezuela) in terms of real exchange rate depreciations, inflation and US interest rates, focussing on the role of the real exchange rate. We find evidence of nonlinearity in this relationship, which we capture through a smooth transition regression model. With the exception of Mexico, nonlinearity in economic growth is associated with changes in the real exchange rate, with depreciations leading to different relationships compared with appreciations. Regimes for Mexico are associated with the business cycle through past growth rates, with effectively symmetric effects of real exchange rate changes. Overall, our results are in accord with other recent literature that depreciations have negative effects for growth.

Keywords: business cycles regimes; non-linear models; smooth transition models; Latin America; real exchange rate (search for similar items in EconPapers)
Pages: 49 pages
Date: 2004
New Economics Papers: this item is included in nep-ifn and nep-lam
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Citations: View citations in EconPapers (8)

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Journal Article: Modelling real exchange rate effects on output performance in Latin America (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:man:cgbcrp:35

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