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Fertility and the real exchange rate

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  • Andrew K. Rose
  • Saktiandi Supaat
  • Jacob Braude

Abstract

We use a quinquennial data set covering 87 countries between 1975 and 2005 to investigate empirically the relationship between fertility and the real effective exchange rate. Theoretically, a country experiencing a decline in its fertility rate can be expected to experience a real depreciation. We test and confirm this hypothesis, controlling for a number of other potential determinants. We find a statistically significant and robust link between fertility and the exchange rate. Our point‐estimate is that a decline in the fertility rate of one child per woman is associated with a depreciation of approximately 15% in the real effective exchange rate. On utilise une base de données quinquennales pour 87 pays entre 1975 et 2005 afin d'étudier empiriquement la relation entre fécondité et taux de change réel effectif. Théoriquement, un pays qui fait l'expérience d'un déclin dans le taux de fécondité peut s'attendre à une dépréciation réelle. On teste et on confirme que c'est le cas, en contrôlant un certain nombre d'autres déterminants potentiels. Il existe une relation significative et robuste entre fécondité et taux de change. Un déclin du taux de fécondité d'un enfant par femme est associéà une dépréciation d'à peu près 15% dans le taux de change réel effectif.

Suggested Citation

  • Andrew K. Rose & Saktiandi Supaat & Jacob Braude, 2009. "Fertility and the real exchange rate," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(2), pages 496-518, May.
    • Handle: RePEc:wly:canjec:v:42:y:2009:i:2:p:496-518
    DOI: 10.1111/j.1540-5982.2009.01517.x
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    8. Kamrul Hassan & Ruhul Salim, 2011. "The linkage between relative population growth and purchasing power parity," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 10(2), pages 154-169, July.
    9. Jean-François Carpantier, 2021. "Commodity Prices in Empirical Research," Dynamic Modeling and Econometrics in Economics and Finance, in: Gilles Dufrénot & Takashi Matsuki (ed.), Recent Econometric Techniques for Macroeconomic and Financial Data, pages 199-227, Springer.
    10. Yukio Fukumoto & Tomoko Kinugasa, 2017. "Age Structure and Trade Openness: An Empirical Investigation," The World Economy, Wiley Blackwell, vol. 40(6), pages 1247-1263, June.
    11. Max Groneck & Christoph Kaufmann, 2014. "Relative Sectoral Prices and Population Ageing: A Common Trend," Working Paper Series in Economics 69, University of Cologne, Department of Economics.
    12. Max Groneck & Christoph Kaufmann, 2017. "Determinants of Relative Sectoral Prices: The Role of Demographic Change," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(3), pages 319-347, June.
    13. Grisse, Christian & Scheidegger, Fabian, 2021. "Covariability of real exchange rates and fundamentals," Economics Letters, Elsevier, vol. 201(C).
    14. Xiaohui Liu & Zhihao Zhou & Jing Zhang, 2023. "Longevity, Fertility, and the Real Exchange Rate," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(2), pages 26-57, March.
    15. Montecino, Juan Antonio, 2018. "Capital controls and the real exchange rate: Do controls promote disequilibria?," Journal of International Economics, Elsevier, vol. 114(C), pages 80-95.
    16. Yukio Fukumoto & Tomoko Kinugasa, 2019. "How Different are demographic impacts on trade openness by geographic region?:Findings from Europe,Asia,America,and Africa," Discussion Papers 1912, Graduate School of Economics, Kobe University.
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    19. Wen-Yi Chen, 2017. "Demographic structure and monetary policy effectiveness: evidence from Taiwan," Quality & Quantity: International Journal of Methodology, Springer, vol. 51(6), pages 2521-2544, November.

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    More about this item

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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