Does Devaluation Cause Stagflation?

Gylfason, Þorvaldur; Schmid, Michael J.

doi:10.2307/135045

Cited by 141 publications

(65 citation statements)

References 16 publications

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“…As a result, the negative impact from the higher cost of imported inputs may dominate the production stimulus from lower relative prices for domestically traded goods. Gylfason and Schmid (1983) provide evidence that the final effect depends on the magnitude by which demand and supply curves shift because of devaluation. 3 To summarize, currency depreciation increases net exports and increases the cost of production.…”

Section: Introductionmentioning

confidence: 93%

The effects of exchange rate fluctuations on economic activity in Turkey

Kandil

Berument

Dinçer

2007

Journal of Asian Economics

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The paper examines the effects of exchange rate fluctuations on real output, the price level, and the real value of components of aggregate demand in Turkey. The theoretical model decomposes movements in the exchange rate into anticipated and unanticipated components. Unanticipated currency fluctuations help to determine aggregate demand through exports, imports, and the demand for domestic currency, and aggregate supply through the cost of imported intermediate goods and producers' forecasts of relative competitiveness. Anticipated exchange rate appreciation has significant adverse effects, contracting the growth of real output and the demand for investment and exports, while raising price inflation. Unanticipated exchange rate fluctuations have asymmetric effects that highlight the importance of unanticipated depreciation in shrinking output growth and the growth of private consumption and investment, despite an increase in export growth. #

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Section: Introductionmentioning

confidence: 93%

The effects of exchange rate fluctuations on economic activity in Turkey

Kandil

Berument

Dinçer

2007

Journal of Asian Economics

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“…Miteza (2006) The foregoing discussion suggests that the literature on the effect of devaluation on output growth is inconclusive (Gylfason and Schmid, 1983). To explore the relation, it may be necessary to capture country specific characteristics.…”

Section: Review Of the Related Literaturementioning

confidence: 99%

Is devaluation contractionary? Empirical evidence for Pakistan

Shahbaz

Islam

Aamir³

2011

Econ Change Restruct

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Abstract:The paper investigates the effect of real devaluation on economic growth. In the empirical model we also include other theoretically justified variables in the case of Pakistan, such as foreign remittances, money supply, and government spending. The paper implements the ADF method to test check the stationarity of the series; and the ARDL bounds testing approach to cointegration to establish a long run relationship. The findings affirm cointegration among the series. Real devaluation exerts contractionary effect on economic growth. The results from variance decomposition and impulse response-function show unidirectional causality from foreign remittances to economic growth; and bidirectional causality between money supply and foreign remittances. Furthermore, money supply Granger causes government spending; while devaluation Granger causes economic growth, albeit, weakly. The results should help in formulating a comprehensive trade policy including the use of competitive devaluation as a tool to correct balance of payments problems.

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“…Sheeley (1986) found that devaluations have a negative impact on output for 16 Latin American countries while Nunnenkamp and Schweickert (1990) rejected the hypothesis of contractionary devaluation. Connoly (1983), Gylfason and Schmid (1983), and Taylor and Rosenweig (1984) found a positive relationship between currency devaluation and output expansion. Gylfason and Risager (1984) and Branson (1986) found that currency devaluation is contractionary to the economy.…”

Section: Literature Reviewmentioning

confidence: 99%

The CFA Franc Devaluation and Output Growth in the Franc Zone

Constant

2012

International Journal of Financial Research

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The objective of this paper is to assess the relationship between the devaluation of the CFA franc and output growth in the Franc Zone (note1). Hinging on the works carried out in Latin America and Asia, the article employs a pool data model to verify, if the January 12th, 1994 CFA franc devaluation had an impact on the output growth in these countries. Our results show that this devaluation had no impact on output growth. This can be explained by the fact that the real adjustment which should have preceded it failed.

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Does Devaluation Cause Stagflation?

Cited by 141 publications

References 16 publications

The effects of exchange rate fluctuations on economic activity in Turkey

The effects of exchange rate fluctuations on economic activity in Turkey

Is devaluation contractionary? Empirical evidence for Pakistan

The CFA Franc Devaluation and Output Growth in the Franc Zone

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