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Fixed Exchange Rate Regimes, Real Undervaluation, and Economic Growth

Fixed Exchange Rate Regimes, Real Undervaluation, and Economic Growth Using data on sectoral value added and purchasing power parity converter, we are able to estimate the home country’s industrial-service (quasi-) relative-relative total factor productivity (TFP) against the United States. Applying those estimates, our econometric exercises provide robust results showing that the fixed exchange rate regime (FERR) dampens the Balassa–Samuelson effect, and the real undervaluation thus created promotes growth. We also explore the channels of undervaluation to promote growth. Lastly, we compare industrial countries and developing countries and find that the FERR has more significant effects in developing countries than in industrial countries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of International Commerce, Economics and Policy World Scientific Publishing Company

Fixed Exchange Rate Regimes, Real Undervaluation, and Economic Growth

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Publisher
World Scientific Publishing Company
Copyright
Copyright ©
ISSN
1793-9933
eISSN
1793-9941
DOI
10.1142/S1793993316500083
Publisher site
See Article on Publisher Site

Abstract

Using data on sectoral value added and purchasing power parity converter, we are able to estimate the home country’s industrial-service (quasi-) relative-relative total factor productivity (TFP) against the United States. Applying those estimates, our econometric exercises provide robust results showing that the fixed exchange rate regime (FERR) dampens the Balassa–Samuelson effect, and the real undervaluation thus created promotes growth. We also explore the channels of undervaluation to promote growth. Lastly, we compare industrial countries and developing countries and find that the FERR has more significant effects in developing countries than in industrial countries.

Journal

Journal of International Commerce, Economics and PolicyWorld Scientific Publishing Company

Published: Jun 1, 2016

Keywords: Fixed exchange rate regimes real undervaluation economic growth

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