A panel data investigation of real exchange rate misalignment and growth

Abstract

The paper investigates the role of real exchange rate misalignment on long-run growth for a set of ninety countries using time series data from 1980 to 2004. We first estimate a panel data model (fixed and random effects) for the real exchange rate in order to produce estimates of the equilibrium real exchange rate and this is then used to construct measures of real exchange rate misalignment. We provide an alternative set of estimates of RER misalignment using panel cointegration methods. The results for the two-step System GMM panel growth models indicate that the coefficients for real exchange rate misalignment are positive for different model specification and samples, which means that a more depreciated (appreciated) real exchange rate helps (harms) long-run growth. The estimated coefficients are higher for developing and emerging countries. Keywords Palavras-Chavecrescimento econômico, desalinhamento da taxa de câmbio real, análise de painel

The Penn Effect revisited: New evidence from Latin America

“…The baseline argument for the existence of the Penn Effect is that nontraded goods are cheaper in poorer countries than in richer countries (see Harrod, ; Balassa, ; Samuelson, ; Bhagwati, ). Thus, the Penn Effect is valid if ψ is negative and significant (see Rodrik, ; Gluzmann et al., ; Vieira & MacDonald, ). A number of studies have found ψ to be negative and significant (see, for instance, Gala, ; Rodrik, ; Gluzmann et al., ; Vieira & MacDonald, ).…”

“…Thus, the Penn Effect is valid if ψ is negative and significant (see Rodrik, ; Gluzmann et al., ; Vieira & MacDonald, ). A number of studies have found ψ to be negative and significant (see, for instance, Gala, ; Rodrik, ; Gluzmann et al., ; Vieira & MacDonald, ).…”

“…From the traditional perspective in the literature, relative productivity growth (or differentials) has been widely credited for real exchange misalignment (see Officer, ; Kravis, Heston, & Summers, ; Rodrik, ; Gluzmann, Levy‐Yeyati, & Sturzenegger, ; Vieira & MacDonald, ). Indeed, the role of relative productivity growth on the real exchange rate was crucial to the verification of what is now known in the literature as the Penn Effect (see Samuelson, ) .…”

The RER Misalignment and Total Factor Productivity: An Empirical Analysis in East Asian Economies

“…In the literature, there have been a large number of studies empirically examining the relationship between the real exchange rate (RER) misalignment and economic growth (see, for example, Cottani et al ., ; Dollar, ; Razin & Collins, ; Bleaney & Greenaway, ; Hausmann et al ., ; Bhalla, ; Prasad et al ., ; Gala, ; Rodrik, ; Bereau et al ., ; Nouira & Sekkat, ; Razmi et al ., ; Vieira & MacDonald, ; Schroder, ). However, little attention has been paid on transmission channels through which the RER misalignment influences economic growth.…”

Indústria e crescimento econômico: evidências para países desenvolvidos e em desenvolvimento

“…Uma literatura mais recente (Gala, 2008;Berg & Miao, 2010;Rodrik, 2008;Vieira & MacDonald, 2012) tem investigado o papel da taxa de câmbio e do desalinhamento cambial sobre o crescimento econômico. Gala (2008) ressalta a importância de se analisar dois importantes canais através dos quais o nível da taxa de câmbio afeta o crescimento, ou seja, através de mudanças no investimento e na tecnologia.…”