Determinants of real exchange rate movements in 15 emerging market economies

Bibliographic Data

ID4866129
AuthorsThomas Goda (0000-0002-4209-9657, Universidad EAFIT), Jan Priewe (0000-0003-2179-5730, University of Applied Sciences, Germany)
Year2020
Volume40
Issue2
Pages214-237
Publication date2020-06-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueBrazilian Journal of Political Economy (JOURNAL)
Journal identifiersISSN: 0101-3157 • E-ISSN: 1809-4538
PublisherFapUNIFESP (SciELO) (PUBLISHER)
DOI10.1590/0101-31572020-3072
OpenAlexW2993137452
SCIELO_PIDS0101-31572020000200214
LanguageEN
Citations received1
References cited16

Previous work has established that an appreciation of the real effective exchange rate (REER) contributes to premature deindustrialization, less productive investment and dependence on commodity booms and busts in emerging markets economies (EME). From the literature, it is less clear, however, what the most important drivers for the cyclical REER movements in EME are. The aim of this study is to provide empirical evidence about the determinants of the REER movements of 15 emerging markets during the last two decades, using statistical analysis and a dynamic panel fixed effects model approach. Our analysis shows that although "commodity" and "industrial" EME are heterogeneous, REER volatility tends to be higher among the former. EME that had more stable REER fared better than those that had a depreciating or appreciating trend (with the notable exception of China). As theoretically expected, commodity prices are an important structural driver of REER movements in "commodity EME". Moreover, the results confirm the existence of the Harrod-Balassa-Samuelson effect, and show the importance of financial inflows. Further, the interventions of central banks were partially successful to avoid more substantial appreciations (depreciations). Finally, we find that lower country risk and, at least in some periods, growing broad money in OECD countries has led to REER appreciations in our sample countries

Boom · Commodity · Deindustrialization · Disinflation · Econometrics · Economics · Economy · Effective exchange rate · Emerging markets · Exchange rate · International economics · Macroeconomics · Market economy · Monetary economics · Volatility (finance · Global Financial Crisis and Policies · Market Dynamics and Volatility · Monetary Policy and Economic Impact

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