Productivity Growth And The Exchange Rate Regime: The Role Of Financial Development
- Topics:
- Organization
- Tags:
- Exchange Rate,
- Finance,
- Financial,
- Free Trade
- Source:
- Harvard University
FREE Registration is required
Overview: This paper offers empirical evidence that a country's choice of exchange rate regime can have a significant impact on its medium-term rate of productivity growth. Moreover, the impact depends critically on the country's level of financial development, its degree of market regulation, and its distance from the global technology frontier. We illustrate how each of these channels may operate in a simple stylized growth model in which real exchange rate uncertainty exacerbates the negative investment effects of domestic credit market constraints. Our approach delivers results that are in striking contrast to the vast existing empirical exchange rate literature, which largely finds the effects of exchange rate volatility on real activity to be relatively small and insignificant.
(Is this item miscategorized? Does it need more tags? Let us know.)
Format: PDF | Size: 539KB | Date: May 2005 | Pages: 45
