Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/194788 
Year of Publication: 
2018
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 6 [Issue:] 1 [Publisher:] Taylor & Francis [Place:] Abingdon [Year:] 2018 [Pages:] 1-18
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
Despite the large body of work that exists on the impact of exchange rate undervaluation on economic growth, only a mere literature focuses on the potential transmission mechanisms. There are authors who consider the size of the tradable sector as the operative channel through which undervaluation impacts economic growth. This is due to poor contracting environment and market failures that are prominent in the tradable sector as bad institutions 'tax' tradables more than non-tradables. We look at this issue in this article for a set of emerging economies using annual data from 1970 to 2014. We find that the size of the tradable sector is indeed the operative channel through which undervaluation impacts growth. We have ruled out that bad institutions 'tax' tradables more than non-tradables. Our results, robust to different undervaluation indexes, highlight instead the importance of total factor productivity surge induced by an undervaluation in increasing growth.
Subjects: 
equilibrium exchange rate
exchange rate undervaluation
economic growth
total factor productivity
transmission channel
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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