Output effects of devaluation: Evidence from Asia

Abstract

We study the effect of devaluation on output in six developing countries of Asia. In an empirical model that includes monetary, fiscal, and external variables, we examine the impact of devaluation as the effect of real exchange depreciation and alternatively as the effect of nominal devaluation and changes in the foreign-to-domestic price ratio. We find that with few exceptions a devaluation fails to make any effect on output over any length of time — short run, intermediate run or long run. Whatever effect on output we are able to uncover comes from the relative price level (the ratio of foreign to domestic prices) but not from nominal devaluation.

An empirical assessment of currency devaluation in East Asian countries

“…2 A panel study by Kamin and Klau (1998), however, shows that contractionary devaluation applies equally to developed economies and Asian countries as well as Latin American countries. Upadhyaya and Upadhyaya (1999) find that with few exceptions a devaluation in Asian countries fails to make any effect on output over any length of time e short run, intermediate run, or long run.…”

Empirical Econometric Analysis of Relationship between Fiscal-Monetary Policies and Output on SAARC Countries

“…These elasticity values are consistent with those of some studies and inconsistent with those of other studies. Upadhyaya and Upadhyay (1999) examined this effect on three countries from SAARC and another three countries belonging to ASEAN. All the long-run exchange rate elasticities were positively significant in Upadhyaya's study (1999).…”

Currency Devaluation and Resource Transfer from the South to the North

“…It can consist of large one-shot devaluations, a series of minidevaluations, or a policy of gradual exchange-rate depreciations (Upadhyaya and Upadhyay 1999). While currency devaluation does not create wealth, it does redistribute wealth across the boundaries of nation-states and/or currency-zone regions.…”