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Infrastructures and the real exchange rate

Author

Listed:
  • Florian Morvillier

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper investigates the nonlinear relationship between infrastructures and the Real Effective Exchange Rate (REER). Applying a Panel Smooth Transition Regression (PSTR) model to a sample of 31 countries over the period 1973-2014, we find strong evidence of a nonlinear impact of Electricity Generating Capacity (EGC) and telecommunications on the REER dynamics. When the network is not completed or the stock of infrastructures is low, an increase in EGC and telecommunications depreciates the REER, while the additional depreciation is lower or inexistent once the network is established. Finally, turning to power grid quality, we show that higher electric power losses are associated with a REER depreciation that is particularly marked when the former are high.

Suggested Citation

  • Florian Morvillier, 2020. "Infrastructures and the real exchange rate," Working Papers hal-04159709, HAL.
    • Handle: RePEc:hal:wpaper:hal-04159709
    Note: View the original document on HAL open archive server: https://hal.science/hal-04159709
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