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Economic growth and exchange rate uncertainty

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  • Joe Tharakan

Abstract

Recent research carried out within the framework of endogenous growth theory has confirmed the positive impact of the openness of an economy on its economic growth. This paper extends that line of investigation further and analyses the effect of exchange rate uncertainty (ERU) on growth. First, it is shown theoretically how ERU can adversely affect the endogenous growth process. Exchange rate uncertainty is then quantified for 21 OECD countries. Finally, panel regressions which use the above measures of ERU together with other determinants are carried out to explain the growth rates of the above group of countries. Results show that exchange rate uncertainty has a negative impact on long-term growth.

Suggested Citation

  • Joe Tharakan, 1999. "Economic growth and exchange rate uncertainty," Applied Economics, Taylor & Francis Journals, vol. 31(3), pages 347-358.
    • Handle: RePEc:taf:applec:v:31:y:1999:i:3:p:347-358
    DOI: 10.1080/000368499324336
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    References listed on IDEAS

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    1. Harrison, Ann, 1996. "Openness and growth: A time-series, cross-country analysis for developing countries," Journal of Development Economics, Elsevier, vol. 48(2), pages 419-447, March.
    2. De Grauwe, Paul, 1996. "International Money: Postwar Trends and Theories," OUP Catalogue, Oxford University Press, edition 2, number 9780198775133.
    3. Richard E. Baldwin, 1992. "On the Growth Effects of Import Competition," NBER Working Papers 4045, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Tang, Bo, 2015. "Real exchange rate and economic growth in China: A cointegrated VAR approach," China Economic Review, Elsevier, vol. 34(C), pages 293-310.
    2. Chen Ku‐Hsieh, 2021. "Depreciate to save the economy? An empirical evidence worldwide," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 1563-1585, January.
    3. Mehdi Seraj & Pejman Bahramian & Abdulkareem Alhassan & Rasool Dehghanzadeh Shahabad, 2020. "The validity of Rodrik’s conclusion on real exchange rate and economic growth: factor priority evidence from feature selection approach," Palgrave Communications, Palgrave Macmillan, vol. 6(1), pages 1-6, December.

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