Publication: Cheaper currencies and long-term growth: The effect of exchange rate management and capital controls
Issued Date
2020-01-01
Resource Type
ISSN
14679701
03785920
03785920
Other identifier(s)
2-s2.0-85099028956
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Mahidol University
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SCOPUS
Bibliographic Citation
World Economy. (2020)
Suggested Citation
Phornchanok Cumperayot, Roy Kouwenberg Cheaper currencies and long-term growth: The effect of exchange rate management and capital controls. World Economy. (2020). doi:10.1111/twec.13081 Retrieved from: https://repository.li.mahidol.ac.th/handle/20.500.14594/60891
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Title
Cheaper currencies and long-term growth: The effect of exchange rate management and capital controls
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Abstract
© 2020 John Wiley & Sons Ltd In this paper, we test whether weakening the domestic currency can help boost economic growth. To estimate this policy-relevant but yet complex link, we apply a new mediation analysis to isolate the long-term growth effects of currency undervaluation induced by active exchange rate management and capital control policies. Using a dataset of 182 countries in the post-Bretton-Woods period, we find that changes in undervaluation driven by exchange rate management and capital control policies have no significant impact on long-term growth. In addition, the direct growth effects of these policies are typically negative and offset the small positive impact gained indirectly through increased currency undervaluation.