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Exchange rate misalignment, exchange rate volatility and economic growth: an analysis for the Brazilian economy

Author

Listed:
  • Flávio Vilela Vieira
  • Aderbal Oliveira Damasceno

Abstract

The goal of this work is to investigate the relevance of exchange rate misalignment and volatility for the Brazilian growth rate for the period of 1995 to 2011. The evidence suggest: i) the exchange rate misalignment is relevant to explain economic growth for the Brazilian economy and exchange rate under depreciation (over appreciation) foster (mitigates) economic growth; ii) exchange rate volatility is relevant to explain economic growth for the Brazilian economy and higher (lower) exchange rate volatility mitigates (foster) economic growth; iii) changes in the investment rate and the growth rate of exports have positive estimated coefficients for the growth model. As a recommendation policy, the suggestion is to keep the real exchange rate at a competitive level with low volatility. JEL Classification: O40; F31; C26.

Suggested Citation

  • Flávio Vilela Vieira & Aderbal Oliveira Damasceno, 2016. "Exchange rate misalignment, exchange rate volatility and economic growth: an analysis for the Brazilian economy," Brazilian Journal of Political Economy, Center of Political Economy, vol. 36(4), pages 704-725.
    • Handle: RePEc:ekm:repojs:v:36:y:2016:i:4:p:704-725:id:203
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    More about this item

    Keywords

    Exchange Rate Misalignment; Exchange Rate Volatility; Economic Growth;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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