The Effects of Currency Devaluation on Output Growth in Developing Economies with Currency Crises

Adebayo Ojuolape, Yusuf H. Agboola (), Alabi K. Moshood () and Oladipupo O. Abdullah ()
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Yusuf H. Agboola: University of Ilorin,, Postal: Department of Economics, P.M.B. 1515, Ilorin, Nigeria, https://www.unilorineconsworkingpapers.com.ng
Alabi K. Moshood: University of Ilorin,, Postal: Department of Economics, P.M.B. 1515, Ilorin, Nigeria, https://www.unilorineconsworkingpapers.com.ng
Oladipupo O. Abdullah: University of Ilorin,, Postal: Department of Economics, P.M.B. 1515, Ilorin, Nigeria, https://www.unilorineconsworkingpapers.com.ng

No 7, Working Papers from Department of Economics, University of Ilorin

Abstract: Currency devaluation is an important topic in the history of international economics and finance. It has proved to impact positively on some economies’ growth and negatively on others. This study focuses on the real effects of devaluing the currency in short and long run using panel data analysis. Seven countries were examined, these are; Ghana, Mexico, Malaysia, Pakistan, Philippines, Singapore and South Africa. These countries devalued their currencies within the same period under consideration. The long run effects and relationships were determined by testing for co-integration using different co-integration methods, and the short run effect was determined using the Fully Modified OLS (FMOLS) and the Error Correction Model. A panel data covering the period between 1981- 2010, was used in the analysis.The empirical results show the existence of no significant relationship between currency devaluation and output growth in the short run and a negative relationship between currency devaluation and economic growth in the long run.

Pages: 15 pages
Date: 2020-12-27
New Economics Papers: this item is included in nep-fdg, nep-his and nep-sea
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