Analyzing the link between real exchange rate and productivity

Ibrahima Diallo

MPRA Paper from University Library of Munich, Germany

Abstract: This paper study, in panel data, the relationship between real exchange rate and total factor productivity on a sample of 68 developed and developing countries for the period 1960-1999. The theoretical part presents the arguments advanced to explain the effects of real exchange rate on productivity, technical efficiency and technological progress. The productivity is obtained as a Solow residual of an estimation of a Cobb-Douglas stochastic production function frontier. The results show that an exchange rate appreciation causes an increase of total factor productivity. The results also illustrates that this effect of real exchange rate on productivity is non linear: threshold effect. Below the threshold exchange rate reacts negatively on productivity while above the threshold it acts positively. Robustness analysis demonstrates that these results hold both in subsamples of developed and developing countries.

Keywords: O11; O16; O47 (search for similar items in EconPapers)
JEL-codes: O11 O16 O47 (search for similar items in EconPapers)
Date: 2010-11-13
New Economics Papers: this item is included in nep-eff and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:29548

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