The effect of real exchange rate misalignment on economic growth: Evidence from emerging markets

Mamun, Abdullahil; Akça, Emrah Eray; Bal, Harun; Hoque, Nazamul

doi:10.20885/ejem.vol13.iss2.art1

Cited by 3 publications

(1 citation statement)

References 28 publications

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“…The study considers average years of total schooling to proxy the human capital. The use of the polity variable developed by and, therefore, sourced from the Center for Systemic Peace has been highly suggested in economic literature as a proxy of political and economic uncertainty and institutional quality (Acemoglu et al , 2005; Mamun et al , 2021; Nosrati et al , 2023).…”

Section: Models Methods and Estimation Proceduresmentioning

confidence: 99%

Does capital flight tone down economic growth? Evidence from emerging Asia

Basher,

Mamun,

Bal

et al. 2023

JFEP

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Purpose This study aims to offer an up-to-date estimate of capital flight from selected emerging Asian economies and examine the anti-growth phenomenon of capital flight by using annual data for the period 1981–2019. Design/methodology/approach The study relies on residual methods to derive the estimate of capital flight with necessary adjustments. It then applies the autoregressive distributed lag Bounds testing approach in examining the impact of capital flight on the economic growth of Asian emerging economies. Findings The study identifies capital flight as the attributor to the slower economic growth of the selected emerging economies of Asia. Practical implications Apart from appropriate policies addressing the issues causing capital flight, unleashing the way of private sector-led growth of the emerging countries with necessary policy, infrastructural, institutional and regulatory support can rather help them retain and repatriate domestic capital. Originality/value The capital flight estimates in earlier studies are antithetical as they differ in terms of definition and estimation procedure. Again, the growth effect of capital flight in these economies has received meager attention in research and policy debates. Furthermore, being country-specific or region-specific, existing studies are unable to compare the growth effect of capital flight for different emerging economies in this region. Examining the growth effects for a large number of countries separately based on a common estimate of capital flight can resolve these issues that this study aims to do.

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Section: Models Methods and Estimation Proceduresmentioning

confidence: 99%

Does capital flight tone down economic growth? Evidence from emerging Asia

Basher,

Mamun,

Bal

et al. 2023

JFEP

Self Cite

View full text Add to dashboard Cite

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The asymmetric impact of real exchange rate misalignment on growth dynamics in Turkey

Khalid,

Civcir,

Özdeşer

et al. 2023

Journal of Policy Modeling

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Economic growth and deviations from the equilibrium exchange rate: a panel ARDL and panel NARDL approach

Ramos-Herrera

2024

AEA

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Purpose The purpose of this study is to provide empirical evidence on the impact of deviations from the long-run sustainable real exchange rate (RER) equilibrium on real economic growth rate applying panel autoregressive distributed lag model (ARDL) (Pooled Mean Group, Mean Group and Dynamic Fixed Effects estimators) in a dynamic heterogeneous panel setting and panel NARDL for the largest database covering 104 countries during 1995–2022 period developed by Couharde et al. (2017). Design/methodology/approach The EQCHANGE database makes available not only the equilibrium RER but also misalignments according to the Behavioral Equilibrium Exchange Rate approach for each country. One of the main objectives is to examine whether undervaluation or overvaluation RER can imply different responses on economic performance trying to differentiate between short and long run effects. Additionally, the authors consider the World Bank (WB)’s income classifications to compare the asymmetries attending to high-income, upper-middle-income, lower-middle-income and low-income levels. Findings Applying the panel ARDL technique, the results suggest that the RER misalignments have a negative but not significant effect on the short-run, nevertheless a negative and highly significant impact on real economic growth rate is detected on the long-run. Considering the panel NARDL, the asymmetric relationship between RER misalignment and economic growth rate is supported considering all countries in the long-run (in the short-term is not significant). In the long run is detected that undervaluation can promote economic growth rate, rather than overvaluation which can harm the economic performance. Additionally, the WB and the International Monetary Fund (IMF) income’s classifications have been applied and the long-run symmetry test is strongly rejected regardless of income group. Originality/value To the best of the author knowledge, this is the first time the non-linear panel ARDL methodology has been applied for analyzing the impact of deviations from the long-run sustainable RER equilibrium on real economic growth. This allows us to see the asymmetric effect not seen before. The panel ARDL estimation can efficiently performed regardless of the integration level of the variables, additionally, it is consistent even in the presence of endogeneity. Besides, another advantage of this method is that it is possible to reflect not only the short but also the long-run dynamics. Moreover, this analysis offers a comparison between linear panel ARDL and non-linear to compare the advantages from the former. Additionally, this study covers the largest database, in particular, 104 countries during the 1995–2022 period implemented with the Couharde et al. (2017) EQCHANGE database. Finally, it is compared the asymmetries attending to different income classifications.

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The effect of real exchange rate misalignment on economic growth: Evidence from emerging markets

Cited by 3 publications

References 28 publications

Does capital flight tone down economic growth? Evidence from emerging Asia

Does capital flight tone down economic growth? Evidence from emerging Asia

The asymmetric impact of real exchange rate misalignment on growth dynamics in Turkey

Economic growth and deviations from the equilibrium exchange rate: a panel ARDL and panel NARDL approach

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