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An empirical analysis of the impacts of real exchange rate on GDP, manufacturing output and services sector in Mauritius

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  • Ashok Babubudjnauth
  • Boopen Seetanah

Abstract

The purpose of this study is to examine the effects of the real exchange rate (RER) movements on gross domestic product, manufacturing and services sectors growth in Mauritius. A Vector Autoregressive approach is used which accounts for both dynamics and endogeneity in the exchange‐growth modeling. In the growth model, real currency depreciation is observed to be contractionary in the short‐run while it is expansionary in the long‐run. Conversely, real home currency depreciation has expansionary effect on manufacturing output growth in the short‐run while it drops manufacturing output in the long‐run. Finally, real domestic currency depreciation has positive long term effect on services sector performance in Mauritius.

Suggested Citation

  • Ashok Babubudjnauth & Boopen Seetanah, 2021. "An empirical analysis of the impacts of real exchange rate on GDP, manufacturing output and services sector in Mauritius," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1657-1669, April.
    • Handle: RePEc:wly:ijfiec:v:26:y:2021:i:2:p:1657-1669
    DOI: 10.1002/ijfe.1869
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