Exchange Rate Undervaluation and R&D Activity

Posted: 8 Feb 2016 Last revised: 8 Feb 2017

See all articles by Shiu‐Sheng Chen

Shiu‐Sheng Chen

Department of Economics, National Taiwan University

Date Written: February 8, 2017

Abstract

We examine how real exchange rate undervaluation policy affects research and development (R&D) activity. Using a panel data set comprising 49 developed and developing countries covering 1996-2011, we show that undervaluing the exchange rate retards technological innovation. Such a negative impact is particularly prominent for developed countries. This paper provides new insights into the real effects of undervaluation policy on the economy. An implication of our work is that countries implementing exchange rate undervaluation policy should be mindful of its potential negative effects on research and development activity.

Keywords: research and development, undervaluation policy

JEL Classification: F31, O31, F38

Suggested Citation

Chen, Shiu-Sheng, Exchange Rate Undervaluation and R&D Activity (February 8, 2017). Journal of International Money and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2728542 or http://dx.doi.org/10.2139/ssrn.2728542

Shiu-Sheng Chen (Contact Author)

Department of Economics, National Taiwan University ( email )

No. 1, Sec. 4, Roosevelt Road
Taipei, 10617
Taiwan

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