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Comparative Analysis Of Exchange Rate Appreciation And Aggregate Economic Activity: Theory And Evidence From Middle Eastern Countries

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  • Magda Kandil
  • Ida Aghdas Mirzaie

Abstract

The paper examines the effects of exchange rate depreciation on real output and price in a sample of 11 developing countries in the Middle East. The theoretical model decomposes movements in the exchange rate into anticipated and unanticipated components. Unanticipated currency fluctuations determine aggregate demand through exports, imports, and the demand for domestic currency, and determine aggregate supply through the cost of imported intermediate goods. The evidence indicates that the supply channel attributed to anticipated exchange rate appreciation results in limited effects on output growth and price inflation. Consistent with theory's predictions, unanticipated appreciation of the exchange rate appears more significant with varying effects on output growth and price inflation across developing countries.

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  • Magda Kandil & Ida Aghdas Mirzaie, 2008. "Comparative Analysis Of Exchange Rate Appreciation And Aggregate Economic Activity: Theory And Evidence From Middle Eastern Countries," Bulletin of Economic Research, Wiley Blackwell, vol. 60(1), pages 45-96, January.
    • Handle: RePEc:bla:buecrs:v:60:y:2008:i:1:p:45-96
    DOI: 10.1111/j.1467-8586.2007.00272.x
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    3. UFOEZE, Lawrence Olisaemeka, 2018. "Effect Of Foreign Exchange Rate Fluctuations On Nigerian Economy," Annals of Spiru Haret University, Economic Series, Universitatea Spiru Haret, vol. 9(1), pages 105-122.

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