Missing: a correlation between exchange rate misalignment and GDP growth

Missing: a correlation between exchange rate misalignment and GDP growth

The impact of real exchange rate movements on growth is a hotly debated issue in policy and academic circles. We provide evidence that this association is very weak for a broad panel of countries. Controlling for initial GDP, country and time fixed effects, a more depreciated currency is associated...

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Veröffentlicht in:Review of international economics 2023-11, Vol.31 (5), p.1602-1615
Hauptverfasser: Goncalves, Carlos, Rodrigues, Mauro
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Sprache:eng
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Foreign exchange rates
GDP
Gross Domestic Product
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creator Goncalves, Carlos
Rodrigues, Mauro
description The impact of real exchange rate movements on growth is a hotly debated issue in policy and academic circles. We provide evidence that this association is very weak for a broad panel of countries. Controlling for initial GDP, country and time fixed effects, a more depreciated currency is associated with higher growth only if the savings rate is not included as a control. Further, even if the latter is not added to the estimation, the correlation becomes insignificant when outliers or very small countries are left out. Importantly, this also holds for the specific subsample of emerging economies.
doi_str_mv 10.1111/roie.12679
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source Wiley Online Library Journals Frontfile Complete; EBSCOhost Business Source Complete
subjects Foreign exchange rates
GDP
Gross Domestic Product
title Missing: a correlation between exchange rate misalignment and GDP growth
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