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Exchange Rate Misalignment and Growth: A Myth?
Author:
Carlos Goncalves null

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Mauro Rodrigues null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2017: Issue 283
Language:
English
Publication Date:
21 Dec 2017
DOI:
https://doi.org/10.5089/9781484330135.001
ISBN:
9781484330135
ISSN:
1018-5941
Pages:
15
Keywords:
WP; exchange rate-growth nexus
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The impact of real exchange rate movements on GDP growth is a hotly debated issue both in policy and academic circles. In this paper, we provide evidence suggesting that the association between exchange rate misalignment and growth for a broad panel of countries is very weak. Controlling for country fixed effects, time effects and initial GDP, a more depreciated currency is associated with higher growth if one does not exclude outliers. However, this positive association always vanishes after controling for the savings rate. Importantly, this applies for both a large panel of countries and for the emerging economies subsample.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund