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Are devaluations contractionary in Asia?

Author

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  • MOHSEN BAHMANI-OSKOOEE
  • SOUPHALA CHOMSISENGPHET
  • MAGDA KANDIL

Abstract

The main purpose of this paper is to determine empirically whether currency depreciation is expansionary or contractionary in Asian countries. It is argued that by disrupting the operation of the financial sector and by introducing uncertainty among consumers and investors, currency depreciation could be contractionary. A reduced-form model is introduced and tested by means of cointegration analysis. The results support our theoretical argument that in many Asian countries depreciation is contractionary.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Souphala Chomsisengphet & Magda Kandil, 2002. "Are devaluations contractionary in Asia?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 25(1), pages 69-82.
    • Handle: RePEc:mes:postke:v:25:y:2002:i:1:p:69-82
    DOI: 10.1080/01603477.2002.11051349
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    Cited by:

    1. Yu Hsing, 2010. "Euro and Technology Effects on Job Turnover in Greek Manufacturing," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 3(1), pages 39-47, July.
    2. M Bahmani-Oskooee & A Mohammadian, 2018. "On the Relation between Domestic Output and Exchange Rates in 68 Countries: An Asymmetry Analysis," Economic Issues Journal Articles, Economic Issues, vol. 23(2), pages 1-29, September.
    3. Garcia-Barragan, Fernando & Liu, Guangling, 2022. "A new approach to capital control for emerging market economies," The North American Journal of Economics and Finance, Elsevier, vol. 61(C).
    4. Phouphet Kyophilavong & Muhammad Shahbaz & Thongphet Lamphayphan & Byoungki Kim & Michael C. S. Wong, 2019. "Are Devaluations Expansionary in Laos?," Global Business Review, International Management Institute, vol. 20(1), pages 72-83, February.
    5. Yu Hsing, 2006. "Responses of output in Poland to shocks to the exchange rate, the stock price, and other macroeconomic variables: a VAR model," Applied Economics Letters, Taylor & Francis Journals, vol. 13(15), pages 1017-1022.
    6. Yu Hsing, 2016. "Is Real Depreciation Contractionary? The Case of South Korea," Economics Bulletin, AccessEcon, vol. 36(4), pages 1951-1958.
    7. Akbar, Muhammad & Ahmad, Eatzaz, 2021. "Repercussions of exchange rate depreciation on the economy of Pakistan: Simulation analysis using macroeconometric model," Journal of Policy Modeling, Elsevier, vol. 43(3), pages 574-600.
    8. Gabriel Montes-Rojas & Nicolás Bertholet, 2023. "When are devaluations more contractionary? A quantile VAR estimation for Argentina," Chapters, in: Fernando Toledo & Louis-Philippe Rochon (ed.), Monetary Policy Challenges in Latin America, chapter 8, pages 132-149, Edward Elgar Publishing.
    9. M. A., Dada, & E. A., Olubiyi, & S. O., Akinbode, & B. P., Abalaba, & O. G., Okungbowa,, 2022. "Effect Of Currency Devaluation On Economic Growth In Nigeria: New Evidence From Dynamic Ols," Ilorin Journal of Business and Social Sciences, Faculty of Social Sciences, University of Ilorin, vol. 24(1), pages 1-19, February.
    10. Munir A. S. Choudhary & Muhammad Aslam Chaudhry, 2007. "Effects of the Exchange Rate on Output and Price Level: Evidence from the Pakistani Economy," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 12(1), pages 49-77, Jan-Jun.
    11. Mironov, Valeriy, 2015. "Russian devaluation in 2014–2015: Falling into the abyss or a window of opportunity?," Russian Journal of Economics, Elsevier, vol. 1(3), pages 217-239.
    12. Yu Hsing, 2020. "Impacts of Real Depreciation and Appreciation on Aggregate Output in Taiwan," The American Economist, Sage Publications, vol. 65(1), pages 123-130, March.
    13. Mohsen Bahmani-Oskooee & Magda Kandil, 2010. "Exchange Rate Fluctuations and Output in Oil-Producing Countries: The Case of Iran," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(3), pages 23-45, May.
    14. Yu HSING, 2019. "Is real depreciation or more government deficit expansionary? The case of Macedonia," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(618), S), pages 51-60, Spring.
    15. HSING, Yu & GUISAN, M.C., 2011. "Real Exchange Rate, Foreign Trade And Real Output Growth: The Case Of Spain, 1970-2009," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 11(1).
    16. Fouopi Djiogap Constant, 2012. "The CFA Franc Devaluation and Output Growth in the Franc Zone," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 3(1), pages 40-48, January.
    17. repec:agr:journl:v:1(618):y:2019:i:1(618):p:51-60 is not listed on IDEAS
    18. Tavakoli , Akbar & Kheradmand , Alireza, 2013. "Chronicle of Currency Collapses and the Effects on Output: Evidence from Six Asian Countries," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 8(2), pages 1-22, April.
    19. Tatiana Evdokimova & Pavel Trunin & Andrei Zubarev, 2013. "The Impact of the Real Ruble Exchange Rate on the Economic Activity in Russia," Research Paper Series, Gaidar Institute for Economic Policy, issue 165P, pages 164-164.
    20. Artatrana Ratha & Eungmin Kang & Mary Edwards, 2008. "Does an Undervalued Currency Promote Growth? Evidence from China," Working Papers 2008-2 Classification- F3, Saint Cloud State University, Department of Economics.
    21. Artatrana Ratha, 2010. "Does Devaluation work for India?," Economics Bulletin, AccessEcon, vol. 30(1), pages 247-264.
    22. repec:ebl:ecbull:v:30:y:2010:i:1:p:247-264 is not listed on IDEAS
    23. MITEZA, Ilir, 2006. "Devaluation And Output In Five Transition Economies: A Panel Cointegration Approach Of Poland, Hungary, Czech Republic, Slovakia And Romania, 1993-2000," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(1).
    24. Yu Hsing & Antoinette S Phillips & Carl Phillips & Yun-Chen Morgan, 2019. "Does Peso Depreciation or More Government Debt Affect Aggregate Output? The Case of Chile," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 6(1), pages 70-75.

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