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Exchange rate changes and income distribution in 41 countries: Asymmetry analysis

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  • Bahmani-Oskooee, Mohsen
  • Motavallizadeh-Ardakani, Amid

Abstract

Due to the slow adjustment of wages to inflationary effects of currency depreciation, income could be shifted from workers to producers. Could currency appreciation do the opposite? We investigate the asymmetric effects of exchange rate changes on a measure of income distribution in each of the 41 countries for which a GINI coefficient is available. Applying recent asymmetry error-correction modeling and asymmetry cointegration of Shin et al. (2014) provides support for short-run asymmetric effects in 34 countries and long-run asymmetric effects in 22 countries, a unique discovery that was masked by previous research. The asymmetric effects revealed that while depreciations had unequalizing effects in 10 countries, they had equalizing effects in only five countries.

Suggested Citation

  • Bahmani-Oskooee, Mohsen & Motavallizadeh-Ardakani, Amid, 2018. "Exchange rate changes and income distribution in 41 countries: Asymmetry analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 68(C), pages 266-282.
    • Handle: RePEc:eee:quaeco:v:68:y:2018:i:c:p:266-282
    DOI: 10.1016/j.qref.2017.11.009
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    1. Goodness C. Aye & Laurence Harris, 2019. "The effect of real exchange rate volatility on income distribution in South Africa," WIDER Working Paper Series wp-2019-29, World Institute for Development Economic Research (UNU-WIDER).
    2. Peter Golit & Afees Salisu & Akinwunmi Akintola & Faustina Nsonwu & Itoro Umoren, 2019. "Exchange Rate And Interest Rate Differential In G7 Economies," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 22(3), pages 263-286, October.

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    More about this item

    Keywords

    Income distribution; Exchange rate; Nonlinear ARDL; Asymmetry; 41 countries;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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