3 years ago

The real effect of currency misalignment on productivity growth: evidence from middle-income economies

Bernard Njindan Iyke

Abstract

There have been interesting perspectives on the role of real currency misalignment in productivity growth. Whereas some studies warn against the destructive effect of real currency misalignment on productivity growth, others simply encourage it, at least, in the form of undervaluation. This paper documents evidence in support of the latter argument for 100 middle-income countries for the 1994–2010 period, using fixed-effects and generalized method of moments estimation techniques. The paper finds real currency misalignment to enhance productivity growth if it occurs as undervaluation; and to hamper productivity growth if it occurs as overvaluation. The paper also finds the impact of real currency misalignment on productivity growth to be symmetric, implying that the size of the impact is independent of the size of the misalignment. Moreover, the choice of the real misalignment measure may matter.

Publisher URL: https://link.springer.com/article/10.1007/s00181-017-1344-0

DOI: 10.1007/s00181-017-1344-0

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