The Real Exchange Rate and Economic Development

Arslan Razmi (), Martin Rapetti and Peter Skott
Additional contact information
Arslan Razmi: University of Massachusetts Amherst

UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics

Abstract: Recent empirical studies have found a robust correlation between competitive exchange rates and economic growth in developing economies. This paper presents (i) a formal model to help explain these findings and (ii) econometric evidence on the relation between investment and the real exchange rate. The model emphasizes the existence of (hidden) unemployment as a source of endogenous growth, even under constant returns to scale. Growth promoting policies, however, affect the external balance, and two instruments are needed in order to achieve targets for both the growth rate and the trade balance. The real exchange rate can serve as one of those instruments. The implications of the model for the relation between real exchange rates and the rate of capital accumulation find support in our econometric analysis. JEL Categories: F43, O11, O41

Keywords: Real exchange rates; underemployment; capital accumulstion. (search for similar items in EconPapers)
Date: 2011-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://www.umass.edu/economics/publications/2011-08.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
Journal Article: The real exchange rate and economic development (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ums:papers:2011-08

Access Statistics for this paper

More papers in UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics Thompson Hall, Amherst, MA 01003. Contact information at EDIRC.
Bibliographic data for series maintained by Daniele Girardi ( this e-mail address is bad, please contact ).