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Asymmetry Effects of Exchange Rate Changes on Domestic Production in Emerging Countries

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  • Mohsen Bahmani-Oskooee
  • Amirhossein Mohammadian

Abstract

Previous studies that tried to assess the impact of exchange rate changes on domestic production of emerging economies assumed that the effects are symmetric and used a linear model to provide mixed results. In this article, we try to determine whether exchange rate changes could have asymmetric effects which amounts to using a nonlinear model. We find that the nonlinear model performs much better than the linear model and yields results that support asymmetry effects of exchange rate changes on domestic production in many of the countries in our sample, both in the short run and in the long run.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Amirhossein Mohammadian, 2018. "Asymmetry Effects of Exchange Rate Changes on Domestic Production in Emerging Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(6), pages 1442-1459, May.
    • Handle: RePEc:mes:emfitr:v:54:y:2018:i:6:p:1442-1459
    DOI: 10.1080/1540496X.2017.1307730
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    13. Nusair, Salah A. & Olson, Dennis, 2022. "Dynamic relationship between exchange rates and stock prices for the G7 countries: A nonlinear ARDL approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 78(C).
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    15. Uche, Emmanuel & Ihezukwu, Veronica Adaku & Osunkwo, Folusho Olufunke Chinyere & Okoronkwo, Chijioke, 2021. "Does Oil Consumption Respond Asymmetrically to Oil Price, Exchange Rate and Income Differentials?," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 55(2), pages 51-63.
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    17. Yifei Cai & Cosimo Magazzino, 2019. "Are shocks to natural gas consumption transitory or permanent? A more powerful panel unit root test on the G7 countries," Natural Resources Forum, Blackwell Publishing, vol. 43(2), pages 111-120, May.
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