Relationship between Real Exchange Rate and Economic Growth in Asia – Pacific Countries

Abstract

This study proposes to investigate the link between Real Exchange Rate and Economic Growth in ten Asia - Pacific countries and aims to study how Real Exchange Rate (RER) and Economic Growth (EG) were related to each other. This study decomposed the linear relationship between RER and Economic Growth Variables like FER, GDP, Exports and Imports. It was found that FER, GDP, Exports and Imports did have positive relationship with RER in all the ten sample countries. Real Exchange Rate caused exports in countries like Hong Kong and Thailand. But Japan, the only country, did not report long run relationship between RER and Economic Growth Variables.

Keywords: Real Exchange Rate, Imports, Exports and Foreign Exchange Reserves

JEL Classification: G15, F21 and F31