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When and Why Worry About Real Exchange Rate Appreciation? The Missing Link Between Dutch Disease and Growth

2010-12-01 Business & Economics
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Release : 2010-12-01
Genre : Business & Economics
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Book Rating : 781/5 ( reviews)

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Book Synopsis When and Why Worry About Real Exchange Rate Appreciation? The Missing Link Between Dutch Disease and Growth by : International Monetary Fund

Download or read book When and Why Worry About Real Exchange Rate Appreciation? The Missing Link Between Dutch Disease and Growth written by International Monetary Fund. This book was released on 2010-12-01. Available in PDF, EPUB and Kindle. Book excerpt: We review the literature on Dutch disease, and document that shocks that trigger foreign exchange inflows (such as natural resource booms, surges in foreign aid, remittances, or capital inflows) appreciate the real exchange rate, generate factor reallocation, and reduce manufacturing output and net exports. We also observe that real exchange rate misalignment due to overvaluation and higher volatility of the real exchange rate lower growth. Regarding the effect of undervaluation of the exchange rate on economic growth, the evidence is mixed and inconclusive. However, there is no evidence in the literature that Dutch disease reduces overall economic growth. Policy responses should aim at adequately managing the boom and the risks associated with it.

When and Why Worry About Real Exchange Rate Appreciation? The Missing Link Between Dutch Disease and Growth

2014
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Release : 2014
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Book Synopsis When and Why Worry About Real Exchange Rate Appreciation? The Missing Link Between Dutch Disease and Growth by : Nicolás E. Magud

Download or read book When and Why Worry About Real Exchange Rate Appreciation? The Missing Link Between Dutch Disease and Growth written by Nicolás E. Magud. This book was released on 2014. Available in PDF, EPUB and Kindle. Book excerpt: We review the literature on Dutch disease, and document that shocks that trigger foreign exchange inflows (such as natural resource booms, surges in foreign aid, remittances, or capital inflows) appreciate the real exchange rate, generate factor reallocation, and reduce manufacturing output and net exports. We also observe that real exchange rate misalignment due to overvaluation and higher volatility of the real exchange rate lower growth. Regarding the effect of undervaluation of the exchange rate on economic growth, the evidence is mixed and inconclusive. However, there is no evidence in the literature that Dutch disease reduces overall economic growth. Policy responses should aim at adequately managing the boom and the risks associated with it.

When and why Worry about Real Exchange Rate Application?

2010
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Release : 2010
Genre :
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Book Synopsis When and why Worry about Real Exchange Rate Application? by : Nicolás Magud

Download or read book When and why Worry about Real Exchange Rate Application? written by Nicolás Magud. This book was released on 2010. Available in PDF, EPUB and Kindle. Book excerpt:

Fear of Appreciation

2007 Central Bank
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Release : 2007
Genre : Central Bank
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Book Synopsis Fear of Appreciation by : Eduardo Levy-Yeyati

Download or read book Fear of Appreciation written by Eduardo Levy-Yeyati. This book was released on 2007. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: In recent years the term "fear of floating" has been used to describe exchange rate regimes that, while officially flexible, in practice intervene heavily to avoid sudden or large depreciations. However, the data reveals that in most cases (and increasingly so in the 2000s) intervention has been aimed at limiting appreciations rather than depreciations, often motivated by the neo-mercantilist view of a depreciated real exchange rate as protection for domestic industries. As a first step to address the broader question of whether this view delivers on its promise, the authors examine whether this "fear of appreciation" has a positive impact on growth performance in developing economies. The authors show that depreciated exchange rates appear to induce higher growth, but that the effect, rather than through import substitution or export booms as argued by the mercantilist view, works largely through the deepening of domestic savings and capital accumulation.

Evolution and Performance of Exchange Rate Regimes

2003-12-01 Business & Economics
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Release : 2003-12-01
Genre : Business & Economics
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Book Rating : 843/5 ( reviews)

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Book Synopsis Evolution and Performance of Exchange Rate Regimes by : Mr.Kenneth Rogoff

Download or read book Evolution and Performance of Exchange Rate Regimes written by Mr.Kenneth Rogoff. This book was released on 2003-12-01. Available in PDF, EPUB and Kindle. Book excerpt: Using recent advances in the classification of exchange rate regimes, this paper finds no support for the popular bipolar view that countries will tend over time to move to the polar extremes of free float or rigid peg. Rather, intermediate regimes have shown remarkable durability. The analysis suggests that as economies mature, the value of exchange rate flexibility rises. For countries at a relatively early stage of financial development and integration, fixed or relatively rigid regimes appear to offer some anti-inflation credibility gain without compromising growth objectives. As countries develop economically and institutionally, there appear to be considerable benefits to more flexible regimes. For developed countries that are not in a currency union, relatively flexible exchange rate regimes appear to offer higher growth without any cost in credibility.

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