Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154354
Authors: 
Habib, Maurizio Michael
Mileva, Elitza
Stracca, Livio
Year of Publication: 
2016
Series/Report no.: 
ECB Working Paper 1921
Abstract: 
We investigate the impact of movements in the real exchange rate on economic growth based on five-year average data for a panel of over 150 countries in the post Bretton Woods period. Unlike previous literature, we use external instruments to deal with possible reverse causality from growth to the real exchange rate. Our country-specific instruments are (i) global capital flows interacted with individual countries' financial openness and (ii) the growth rate of official reserves. We find that a real appreciation (depreciation) reduces (raises) significantly annual real GDP growth, more than in previous estimates in the literature. However, our results confirm this effect only for developing countries and for pegs.
Subjects: 
economic growth
instrumental variables
panel data
real exchange rate
JEL: 
F31
F43
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2169-5
Document Type: 
Working Paper

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