The effect of real exchange rate misalignment on economic growth: Evidence from emerging markets
Purpose – This study’s main purpose is to investigate the effect of real exchange rate misalignment on economic growth performance for 21 emerging markets from 1980 through 2016. Methods – The study individually measures the real exchange rate misalignment series for 21 emerging markets by using t...
| Main Authors: | , , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Universitas Islam Indonesia
2021-10-01
|
| Series: | Economic Journal of Emerging Markets |
| Subjects: | |
| Online Access: | http://journal.uii.ac.id/JEP/article/view/19071 |
| _version_ | 1818009087816761344 |
|---|---|
| author | Abdullahil Mamun Emrah Eray Akça Harun Bal Nazamul Hoque |
| author_facet | Abdullahil Mamun Emrah Eray Akça Harun Bal Nazamul Hoque |
| author_sort | Abdullahil Mamun |
| collection | DOAJ |
| description |
Purpose – This study’s main purpose is to investigate the effect of real exchange rate misalignment on economic growth performance for 21 emerging markets from 1980 through 2016.
Methods – The study individually measures the real exchange rate misalignment series for 21 emerging markets by using the single-equation approach and then estimates the effect of real exchange rate misalignment, undervaluation, and overvaluation on economic growth performance through dynamic panel system generalized method of moments approach.
Findings – The study finds that the real exchange rate of emerging markets is significantly misaligned. The study also argues that any deviation of the real exchange rate from its equilibrium value impairs economic growth. The view that overvaluation erodes growth is customarily accepted, while a real undervaluation is found to be a growth deteriorating fact.
Implication - From the policy perspective, policymakers should be cautious enough in setting exchange rate policies to check its sustained misalignments over time so that it can enrich the ability of concerned authorities to attain the growth target by using it as a policy instrument.
Originality – The study is in response to the need felt for a common analytical framework for examining misalignment in the real exchange rate to make a more inclusive decision relating to its effects on the growth performance of emerging markets.
|
| first_indexed | 2024-04-14T05:38:43Z |
| format | Article |
| id | doaj.art-b2514fa48bf8494386d2ca5348eb79bf |
| institution | Directory Open Access Journal |
| issn | 2086-3128 2502-180X |
| language | English |
| last_indexed | 2024-04-14T05:38:43Z |
| publishDate | 2021-10-01 |
| publisher | Universitas Islam Indonesia |
| record_format | Article |
| series | Economic Journal of Emerging Markets |
| spelling | doaj.art-b2514fa48bf8494386d2ca5348eb79bf2022-12-22T02:09:33ZengUniversitas Islam IndonesiaEconomic Journal of Emerging Markets2086-31282502-180X2021-10-0113210.20885/ejem.vol13.iss2.art115079The effect of real exchange rate misalignment on economic growth: Evidence from emerging marketsAbdullahil Mamun0Emrah Eray Akça1Harun Bal2Nazamul Hoque3Department of Business Administration, International Islamic University Chittagong, Chittagong, BangladeshDepartment of Economics, Çukurova University, Adana, TurkeyDepartment of Economics, Çukurova University, Adana, TurkeyDepartment of Business Administration, International Islamic University Chittagong, Chittagong, Bangladesh Purpose – This study’s main purpose is to investigate the effect of real exchange rate misalignment on economic growth performance for 21 emerging markets from 1980 through 2016. Methods – The study individually measures the real exchange rate misalignment series for 21 emerging markets by using the single-equation approach and then estimates the effect of real exchange rate misalignment, undervaluation, and overvaluation on economic growth performance through dynamic panel system generalized method of moments approach. Findings – The study finds that the real exchange rate of emerging markets is significantly misaligned. The study also argues that any deviation of the real exchange rate from its equilibrium value impairs economic growth. The view that overvaluation erodes growth is customarily accepted, while a real undervaluation is found to be a growth deteriorating fact. Implication - From the policy perspective, policymakers should be cautious enough in setting exchange rate policies to check its sustained misalignments over time so that it can enrich the ability of concerned authorities to attain the growth target by using it as a policy instrument. Originality – The study is in response to the need felt for a common analytical framework for examining misalignment in the real exchange rate to make a more inclusive decision relating to its effects on the growth performance of emerging markets. http://journal.uii.ac.id/JEP/article/view/19071economic growthRER misalignmentsingle-equation approachsystem GMMemerging markets |
| spellingShingle | Abdullahil Mamun Emrah Eray Akça Harun Bal Nazamul Hoque The effect of real exchange rate misalignment on economic growth: Evidence from emerging markets Economic Journal of Emerging Markets economic growth RER misalignment single-equation approach system GMM emerging markets |
| title | The effect of real exchange rate misalignment on economic growth: Evidence from emerging markets |
| title_full | The effect of real exchange rate misalignment on economic growth: Evidence from emerging markets |
| title_fullStr | The effect of real exchange rate misalignment on economic growth: Evidence from emerging markets |
| title_full_unstemmed | The effect of real exchange rate misalignment on economic growth: Evidence from emerging markets |
| title_short | The effect of real exchange rate misalignment on economic growth: Evidence from emerging markets |
| title_sort | effect of real exchange rate misalignment on economic growth evidence from emerging markets |
| topic | economic growth RER misalignment single-equation approach system GMM emerging markets |
| url | http://journal.uii.ac.id/JEP/article/view/19071 |
| work_keys_str_mv | AT abdullahilmamun theeffectofrealexchangeratemisalignmentoneconomicgrowthevidencefromemergingmarkets AT emraherayakca theeffectofrealexchangeratemisalignmentoneconomicgrowthevidencefromemergingmarkets AT harunbal theeffectofrealexchangeratemisalignmentoneconomicgrowthevidencefromemergingmarkets AT nazamulhoque theeffectofrealexchangeratemisalignmentoneconomicgrowthevidencefromemergingmarkets AT abdullahilmamun effectofrealexchangeratemisalignmentoneconomicgrowthevidencefromemergingmarkets AT emraherayakca effectofrealexchangeratemisalignmentoneconomicgrowthevidencefromemergingmarkets AT harunbal effectofrealexchangeratemisalignmentoneconomicgrowthevidencefromemergingmarkets AT nazamulhoque effectofrealexchangeratemisalignmentoneconomicgrowthevidencefromemergingmarkets |