Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/227897
Authors: 
Demir, Firat
Razmi, Arslan
Year of Publication: 
2020
Series/Report no.: 
Working Paper No. 2020-06
Abstract: 
This paper surveys the theoretical and empirical literature on the effects of the real exchange rate (RER) on international trade, economic development and growth. We summarize the main conceptual issues, discuss the relevance of the RER as an instrument of development policy, provide an overview of the macroeconomic and microeconomic mechanisms that link the RER to trade and long run growth and development, analyze the challenges - especially the disconnect between theory and data - that often arise in empirical applications, and present new avenues for future research. In the process, we present some updated estimates and illustrative figures. The mechanisms through which the RER influences long-run growth and structural change outcomes remains a promising area of research and the relevance of individual channels in different contexts deserves much more careful investigation. Greater data availability should help fill some of these gaps in our understanding.
Subjects: 
Real exchange rate
Economic development
Structural change
Economic growth
International trade
JEL: 
F31
F43
E2
O11
O24
Document Type: 
Working Paper

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