Exchange rate undervaluation and manufactured exports: A deliberate strategy?

Abstract

a b s t r a c tNouira, Ridha, Plane, Patrick, and Sekkat, Khalid-Exchange rate undervaluation and manufactured exports: A deliberate strategy?Recent literature suggests that a proactive exchange rate policy in accordance with price incentives (i.e. undervaluation) can foster manufactured exports and growth. This paper is built on these recent developments and investigates, using a sample of 52 developing countries, whether such a proactive exchange rate policy is adopted. The results show that during the period 1991-2005 a number of countries has used undervaluation to foster the price competitiveness of manufactured exports. Journal of Comparative Economics 39 (4)

What determines the extent of real exchange rate misalignment in developing countries?

“…The coefficient of the lagged value of absolute misalignment is significant and positive with comparable values across specifications. It suggests a high-degree of persistence of misalignment in accordance with the results by Nouira et al (2011).…”

“…We use the same panel co-integration methodology as in Nouira et al (2011), which involves 4 major steps. First, test whether individuals (e.g.…”

“…These are the lagged dependent variable, whether the country is an oil exporter and inflation pressures. The introduction of the lagged dependent variable is motivated by the persistence in misalignment in developing countries found by Nouira et al (2011). Oil exporters face frequent boom and bust in their foreign revenues, which can induce REER misalignment.…”

“…A number of empirical analyses confirm that the RER can be misaligned irrespective of the nominal regime (e.g. Coudert et al, 2013;Nouira et al, 2011).…”

The Role of Export Diversification on Economic Growth in South Africa

“…Furthermore, literature shows that the productive systems suffered significantly from high trade barriers and distorted relative prices (Nouira, Plane and Sekkat, 2009). In light of this, building new comparative advantage in new and non-traditional exports, including labour intensive manufactures, still remains a crucial objective for small economies.…”