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International Financial Integration and Real Exchange Rate Long-Run Dynamics in Emerging Countries


Christophe Rault


University of Orleans; Université d'Évry - Centre D'Etudes des Politiques Economiques et de L'Emploi (EPEE); Université Paris I Panthéon-Sorbonne - Equipe Universitaire de Recherche en Economie Quantitative (EUREQUA); Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Thouraya Hadj Amor


FSEGM, Monastir University-Tunisia

Guglielmo Maria Caporale


London South Bank University; Brunel University - Brunel Business School; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
September 16, 2009

William Davidson Institute Working Paper No. 970
DIW Berlin Discussion Paper No. 941

Abstract:     
The aim of this paper is to provide new empirical evidence on the impact of international financial integration on the long-run Real Exchange Rate (RER) in 39 developing countries belonging to three different geographical regions (Latin America, Asia and MENA). It covers the period 1979-2004, and carries out "second-generation" tests for non-stationary panels. Several factors, including international financial integration, are shown to drive the long-run RER in emerging countries. It is found that the new financial environment characterised by international financial integration leads to a depreciation of the RER in the long run. Further, RER misalignments take the form of an under-valuation in most MENA countries and an over-valuation in most Latin American and Asian countries

Number of Pages in PDF File: 26

Keywords: emerging economies, real exchange rate, financial integration, misalignment, second-generation panel unit-root and cointegration tests

JEL Classification: E31, F0, F31, C15

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Date posted: October 17, 2009 ; Last revised: November 5, 2009

Suggested Citation

Rault, Christophe, Hadj Amor, Thouraya and Caporale, Guglielmo Maria, International Financial Integration and Real Exchange Rate Long-Run Dynamics in Emerging Countries (September 16, 2009). William Davidson Institute Working Paper No. 970; DIW Berlin Discussion Paper No. 941. Available at SSRN: http://ssrn.com/abstract=1490074 or http://dx.doi.org/10.2139/ssrn.1490074

Contact Information

Christophe Rault (Contact Author)
University of Orleans
Rue de Blois
BP 6739
Orleans, Orleans cedex 2 45067
France
Université d'Évry - Centre D'Etudes des Politiques Economiques et de L'Emploi (EPEE) ( email )
Department of Economics
91025 EVRY Cedex
France
+ 33 (0)1 69 47 70 36 (Phone)
+ 33 (0)2 43 04 22 06 (Fax)
University of Paris 1 Pantheon-Sorbonne - Equipe Universitaire de Recherche en Economie Quantitative (EUREQUA) ( email )
106-112 Boulevard de l'Hopital
Paris Cedex 13, 75647
France
HOME PAGE: http://www.multimania.com/chrault/
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Poschinger Str. 5
Munich, DE-81679
Germany
Thouraya Hadj Amor
FSEGM, Monastir University-Tunisia ( email )
Sidi Messaoud Hiboun
5111 Mahdia
Monastir, 4100
Tunisia
Guglielmo Maria Caporale
London South Bank University ( email )
Centre for Monetary and Financial Economics
London
United Kingdom
Brunel University - Brunel Business School ( email )
Kingston Lane Uxbridge
Middlesex, West London
Uxbridge, UB8 3PH, London UB8 3PH
United Kingdom
+44 1895 266713 (Phone)
+44 1895 269770 (Fax)
HOME PAGE: http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/ef_staff/guglielmocaporale/
CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Poschinger Str. 5
Munich, DE-81679
Germany
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