Growth and the Real Exchange Rate - Evidence from Eleven Countries

HKIMR Working Paper No. 08/2001

18 Pages Posted: 27 Aug 2007

See all articles by Mark Crosby

Mark Crosby

University of Melbourne - Melbourne Business School

Glenn Otto

UNSW Australia Business School, School of Economics

Date Written: August 2001

Abstract

There are conflicting theories about the effect of real exchange rate movements on output growth. Expenditure switching models suggest that a real depreciation leads to an increase in net exports due to the increase in competitiveness of the export sector, and hence to an increase in output growth. Contractionary depreciation models, on the other hand, suggest that real depreciations can reduce output growth. In this paper we examine the evidence on the impact of real exchange rate movements on the real economy for a number of countries. We find that different countries have had quite different experiences with respect to the response of output growth to exchange rate changes, and we offer some suggestions as to why this has been the case.

Suggested Citation

Crosby, Mark and Otto, Glenn, Growth and the Real Exchange Rate - Evidence from Eleven Countries (August 2001). HKIMR Working Paper No. 08/2001. Available at SSRN: https://ssrn.com/abstract=1009396 or http://dx.doi.org/10.2139/ssrn.1009396

Mark Crosby (Contact Author)

University of Melbourne - Melbourne Business School ( email )

200 Leicester Street
Carlton, Victoria 3053 3186
Australia

Glenn Otto

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

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