We acknowledge helpful comments from two anonymous referees, participants of conferences on Intra-European Imbalances, Global Imbalances, International Banking, and International Financial Stability (Berlin, 2012), Mathematical Methods in Economics (Karvina, 2012), and XXI International Conference on Money, Banking and Finance (Rome, 2012), and research assistance by Hedvika M. Kočendová. Kočenda benefited from research support by GAČR grant No. 403/11/0020. We also thank Stiftung Geld und Währung for its support. The usual disclaimer applies.
Special issue: Four Generations of Global Imbalances. Guest Editors: Gunther Schnabl and Ansgar Belke
Short- and Long-term Growth Effects of Exchange Rate Adjustment
Article first published online: 23 JAN 2013
© 2013 Blackwell Publishing Ltd
Review of International Economics
Special Issue: Four Generations of Global Imbalances. Guest Editors: Gunther Schnabl and Ansgar Belke
Volume 21, Issue 1, pages 137–150, February 2013
How to Cite
Kočenda, E., Maurel, M. and Schnabl, G. (2013), Short- and Long-term Growth Effects of Exchange Rate Adjustment. Review of International Economics, 21: 137–150. doi: 10.1111/roie.12025
- Issue published online: 23 JAN 2013
- Article first published online: 23 JAN 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.