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Fear of Appreciation

Eduardo Levy Yeyati and Federico Sturzenegger
Authors registered in the RePEc Author Service: Eduardo Levy Yeyati () and Federico Sturzenegger

Business School Working Papers from Universidad Torcuato Di Tella

Abstract: In recent years the term "fear of floating" has been used to describe exchange rate regimes that, while officially flexible, in practice intervene heavily to avoid sudden or large depreciations. However, the data reveals that in most cases (and increasingly so in the 2000s) intervention has been aimed at limiting appreciations rather than depreciations, often motivated by the neomercantilist view of a depreciated real exchange rate as protection for domestic industries. As a first step to address the broader question of whether this view delivers on its promise, we examine whether this “fear of appreciation” has a positive impact on growth performance in developing economies. We show that depreciated exchange rates appear to induce higher growth, but that the effect, rather than through import substitution or export booms as argued by the mercantilist view, works largely through the deepening of domestic savings and capital accumulation.

Pages: 40 pages
Date: 2007
New Economics Papers: this item is included in nep-cba
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Related works:
Journal Article: Fear of appreciation (2013) Downloads
Working Paper: Fear of Appreciation (2012) Downloads
Working Paper: Fear of Appreciation (2007) Downloads
Working Paper: Fear of appreciation (2007) Downloads
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