Real exchange rate, technological catching up and spillovers in a balance-of-payments constrained growth model

Missio, Fabrício José; Gabriel, Luciano Ferreira

doi:10.1016/j.econ.2016.09.008

Cited by 7 publications

(3 citation statements)

References 23 publications

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“…It can be inferred from the estimates that appreciation of the exchange rate will increase the CAD in India. Indian CAD leads to the appreciation of the currency, making exports more expensive and less competitively priced in international markets (Bilgili et al, 2021;Fleming, 1962;Missio & Gabriel, 2016;Mundell, 1963;Taneja & Ansari, 2016;Vieira & MacDonald, 2020) resulting in the reduction of the exports and an increase in imports. This gap between exports and imports will result in a higher CAD because developing countries like India are net importers (see, Ahmed, 1986;Bhat & Sharma, 2018;Darrat, 1988;Feldstein, 1982;Mohanty, 2019).…”

Section: Discussionmentioning

confidence: 99%

“…(4) to incorporate the impact of change in exchange rate on twin deficit phenomena [see Eq. (8)] (Ahmed, 1986; Arora & Rakhyani, 2020; Bhat & Sharma, 2018; Darrat, 1988; Feldstein, 1982; Missio & Gabriel, 2016; Mohanty, 2019; Padhi, 2019; Saleh & Harvie, 2005; Taneja & Ansari, 2016; Vieira & MacDonald, 2020). Where, EXR is real effective exchange rate (REER) at time t .…”

Section: Methodsmentioning

confidence: 99%

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Impact of fiscal deficit and trade openness on current account deficit in India: new evidence on twin deficits hypothesis

Mehta

Mallikarjun

2023

ECON

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PurposeThis study aims to examine the impact of fiscal deficit, exchange rate and trade openness on current account deficit (CAD). The study tried to empirically investigate the ‘twin deficits hypothesis’ and ‘compensation hypothesis’ in the Indian context.Design/methodology/approachAutoregressive distributed lagARDL) bound test approach was used by taking annual time series data from 1978 to 2021. The estimates confirm a significant long-run and short-run relationship between dependent variables, i.e. CAD and independent variables such as the fiscal deficit, exchange rate and trade openness.FindingsThe results show that positive shocks of all explanatory variables significantly affect the CAD. CAD and fiscal deficit are significantly associated, as the coefficient of fiscal deficit is positive and significant. The study also found that exchange rate and trade openness significantly affect the CAD. The coefficients of exchange rate and trade openness are positive and significant. The findings show that an increase in CADs results from liberal trade policies that help domestic industries grow their trade and expansionary fiscal policy, leading to a higher fiscal deficit. The negative and significant error correction term suggests that short-run disequilibrium converges to long-run equilibrium at a speed of 19.2%. The findings validate the ‘twin deficits hypothesis’ and ‘compensation hypothesis’ in the Indian context.Practical implicationsIt can be inferred from the study that liberal policy to promote economic growth and trade openness should be designed and promoted judiciously. An excessive liberalised approach may impact other macroeconomic variables such as current account balances. Integrating the domestic market with global markets poses a big challenge for countries like India that aspire to penetrate global markets. Furthermore, the Indian policy makers should rigorously work and promote the policies such as Fiscal Responsibility and Budget Management (FRBM) as reduction in fiscal deficits, trade imbalances will also be reduced.Originality/valueThis study contributes to the existing literature on ‘twin deficit’ and trade openness by giving new evidence on the trilemma between designing sustainable fiscal policy by spending wisely without imperilling the country's global presence and CAD.

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Section: Discussionmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Impact of fiscal deficit and trade openness on current account deficit in India: new evidence on twin deficits hypothesis

Mehta

Mallikarjun

2023

ECON

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“…A number of publications are devoted to the coverage of the rating results of the world countries by different parameters of economic competitiveness, including technological. In the studies by S. Dutta (2019), H. Edsand (2019, O. Ilyash (2018), S. Kumar (2019), F. Missio (2016), K. Munir (2002) and others the problems of technological modernization of economy and economic growth of national economy are outlined.…”

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confidence: 99%

Condition, Regional Disparity And Strategic Priorities Of Providing Technological Competitiveness Of Ukraine's Economy

Lykholat

Zaychenko

Rozhko

2020

ASEJ

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The proper role and high importance of regional peculiarity of innovation and technological activity in the context of ensuring technological competitiveness of the economy depends on its identification and understanding of the critical differentiation of the regions of Ukraine by the number of innovatively active enterprises, production volumes, share of realized innovative products, as well as the positioning the regions of Ukraine by the share of enterprises with technological innovations, the rate of its growth and the share of realized innovative products in the total volume of industrial products sold. It is shown that the modern policy of ensuring technological competitiveness of the Ukrainian economy is formed in the context of contemporary challenges of global competition, fundamental features, which are the impact of global crises, financial and economic instability; increase of external expansion due to processes of globalization, development of information economy; pressure on the country's debt; increase in import dependency; high external labour migration activity; destabilization of economic development through military conflict and hybrid attacks; critical disparities in regional development. The strategic priorities of the state policy of ensuring technological competitiveness of the Ukrainian economy have been determined: intensification of technological development of the economy, growth of the general level of innovative activity, formation of a competitive market of intellectual property, development of infrastructure for support of technological innovations, improvement of resource provision of innovative activity, improvement of business parameters of competition.

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An empirical investigation of the relationship between real exchange rate and innovation: Evidence from China

Wen

Usman

2023

Int. J Fin Econ

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The aims of this study is to investigate the relationship between real exchange rate and innovation in China for the period spanning from 1985 to 2020 using an annual time series data collected from different sources. The study employs autoregressive distributed lag bound test and other econometrics techniques to analyse the short‐run and long‐run relationship among the variables. The findings of the study reveal the existence of short‐run and long‐run relationship between real exchange rate (undervalued RMB) and technological innovation. Furthermore, real exchange rate (undervalued RMB) has positive effect on innovation while real exchange rate volatility is negatively affect innovation. Based on the above empirical findings, the study suggests some policy implications which are considered important for fostering rapid and sustainable economic growth.

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Real exchange rate, technological catching up and spillovers in a balance-of-payments constrained growth model

Cited by 7 publications

References 23 publications

Impact of fiscal deficit and trade openness on current account deficit in India: new evidence on twin deficits hypothesis

Impact of fiscal deficit and trade openness on current account deficit in India: new evidence on twin deficits hypothesis

Condition, Regional Disparity And Strategic Priorities Of Providing Technological Competitiveness Of Ukraine's Economy

An empirical investigation of the relationship between real exchange rate and innovation: Evidence from China

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