This paper examines the impact of exchange rate volatility on economic growth. An empirical investigation based on a sample of 45 developing and emerging countries over the period of 1985~2015 is conducted using the difference and system generalized method of moments estimators. Findings suggest that the generalized autoregressive conditional heteroskedasticity-based measure of nominal and real exchange rate volatility has a negative impact on economic growth. Also, the effect of exchange rate volatility depends on the exchange rate regimes and financial openness, that is, volatility is more harmful when countries adopt flexible exchange rate regimes and financial openness.
JEL Classifications: F43, F31, C23
This paper aims to examine the combined effect of trade openness and real exchange rate on economic growth. We use an asymmetric ARDL panel model on a sample of Middle Eastern and North African (MENA) countries with data from 1990 to 2018. The results of the linear model prove, for the long-run component, that all variables, except government consumption, are significant. In addition, the interaction term between trade openness and the real exchange rate is negative and has a significant impact on economic growth at the 5% level. The results of the short-run component show that all variables are significant. The error correction adjustment coefficient is, however, negative but not significant. As a result, the linear model cannot be used to adjust the variables of the short-run dynamic to long-run equilibrium. The findings of the nonlinear model point to a positive and significant asymmetric effect of the interaction variable for both upward and downward movements on the economic growth in the long run. In other words, the findings of the study suggest that trade openness and real exchange rate need to be combined to enhance GDP growth. The results of the nonlinear short run component show that the impact of the interaction term between trade openness and real exchange rate on economic growth is significantly negative for both positive and negative variations.
Contribution/Originality:This study is one of very few studies that have investigated the combined effect of trade openness and real exchange rate on economic growth. Additionally, this is the first study in which the asymmetric nonlinear ARDL model is used to analyze the relationship between these variables in MENA countries.
This article investigates the conditional dependence structure between crude oil price and stock returns markets. Our empirical analysis relies on an asset pricing model that accommodates the asset return dependence through the copula functions. The obtained results indicate the superiority of our approach and show evidence of significant tail dependence of the returns in unstable financial environment.
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