Short- and long-term growth effects of exchange rate adjustment

0391312 - NHU-C 2014 RIV GB eng J - Journal Article
Kočenda, Evžen - Maurel, M. - Schnabl, G.
Short- and long-term growth effects of exchange rate adjustment.
Review of International Economics. Roč. 21, č. 1 (2013), s. 137-150. ISSN 0965-7576. E-ISSN 1467-9396
R&D Projects: GA ČR(CZ) GAP403/11/0020
Institutional support: PRVOUK-P23
Keywords : optimum currency areas * panel-data * volatility
Subject RIV: AH - Economics
Impact factor: 0.657, year: 2013

The European sovereign debt crisis revived the discussion concerning pros and cons of exchange rate adjustment in the face of asymmetric shocks. In the spirit of Keynes, exit from the euro area is to regain rapidly international competitiveness. In the spirit of Schumpeter, exchange rate stability with structural reforms would be beneficial towards the long-run growth performance. Previous literature has estimated the average growth of countries with different degrees of exchange rate flexibility. This literature is augmented by analyzing short- and long-term growth effects of exchange rate flexibility in a panel cointegration framework for a sample of 60 countries clustered in five country groups. The estimations show that countries with a high degree of exchange rate stability exhibit a higher long-term growth performance. It is shown that the degree of business cycle synchronization with the anchor country matters for the impact of exchange rate flexibility on growth.
Permanent Link: http://hdl.handle.net/11104/0220404