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Exchange rate undervaluation and economic growth: Díaz Alejandro (1965) revisited

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  • Glüzmann, Pablo Alfredo
  • Levy-Yeyati, Eduardo
  • Sturzenegger, Federico

Abstract

To understand the growth effects of currency undervaluation we estimate its impact on the different components of GDP. We find that, for developing countries, undervaluation does not affect the tradable sector, but does lead to greater domestic savings and investment, as well as employment.

Suggested Citation

  • Glüzmann, Pablo Alfredo & Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2012. "Exchange rate undervaluation and economic growth: Díaz Alejandro (1965) revisited," Economics Letters, Elsevier, vol. 117(3), pages 666-672.
    • Handle: RePEc:eee:ecolet:v:117:y:2012:i:3:p:666-672
    DOI: 10.1016/j.econlet.2012.07.022
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    References listed on IDEAS

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    More about this item

    Keywords

    Undervaluation; Economic growth; Real exchange rate;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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