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N° 2009-17 |
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| September 2009 |
Currency Misalignments and Growth:
a New Look Using Nonlinear Panel Data Methods |
Sophie Béreau
Antonia Lopez Villavicencio
Valérie Mignon |
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| The aim of this paper is to investigate the link between currency misalignments and economic growth.
Relying on panel cointegration techniques, we calculate real exchange rate (RER) misalignments as deviations
of actual RERs from their equilibrium values for a set of advanced and emerging economies.
Estimating panel smooth transition regression models, we show that RER misalignments have a differentiated
impact on economic growth depending on their sign: whereas overvaluations negatively affect
economic growth, real exchange rate undervaluations significantly enhance it. This result indicates that
undervaluations may drive the exchange rate to a level that encourages exports and promotes growth. |
Non-technical summary  |
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Résumé
non-technique
en français |
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| Full text |
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| Growth; exchange rate misalignments; nonlinearity; PSTR models |
Keywords |
| F31; O47; C23 |
JEL classification |
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