Can Real Exchange Rate Undervaluation Boost Exports and Growth in Developing Countries? Yes, But Not for Long

A policy of managed real undervaluation may have been an important factor behind the success of East Asia's export-led growth model. But current discussions over the value of China's currency demonstrate the controversy this kind of polic...

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Main Authors:	Haddad, Mona, Pancaro, Cosimo
Format:	Brief
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING ADJUSTMENT COSTS ADVANCED ECONOMIES ANNUAL GROWTH CAPITA GROWTH CAPITA INCOME CAPITAL ACCOUNT CAPITAL ACCUMULATION CAPITAL CONTROLS CAPITAL INFLOWS CAPITAL OUTFLOWS CENTRAL BANK COMPETITIVE REAL EXCHANGE RATE COMPETITIVENESS COMPLEMENTARY FACTORS CONSOLIDATION CURRENCY CURRENCY CRISES CURRENT ACCOUNT CURRENT ACCOUNT DEFICITS DEVALUATION DEVALUATIONS DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DISTORTIONS DIVERSIFIED PORTFOLIO ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC RESEARCH EMPIRICAL EVIDENCE EQUILIBRIUM EXCHANGE RATE DEPRECIATION EXCHANGE RATE DEVALUATIONS EXCHANGE RATE EXPECTATIONS EXCHANGE RATE INSTABILITY EXCHANGE RATE REGIME EXCHANGE RATE VARIABILITY EXCHANGE-RATE EXPENDITURES EXPORT VOLUMES FINANCIAL CRISIS FINANCIAL DEVELOPMENT FINANCIAL INSTABILITY FINANCIAL INSTRUMENTS FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SYSTEMS FIXED EFFECTS FOREIGN EXCHANGE FOREIGN EXCHANGE MARKETS FOREIGN RESERVE FOREIGN RESERVES GROWTH MODEL IMPLICIT TAX INCOME GROWTH INCOME LEVELS INDUSTRIALIZED COUNTRIES INFLATION INTEREST RATE INTEREST RATE VOLATILITY INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL MARKETS INTERNATIONAL MONETARY FUND INTERNATIONAL MONEY INVESTMENT HORIZONS LEVY LIBERALIZATION LIBERALIZATION OF CAPITAL LIQUIDITY LONG RUN LONG TERM LOW-INCOME COUNTRIES MACROECONOMIC STABILITY MARKET FAILURES MARKET FORCES MEDIUM TERM MISALIGNMENTS MONETARY ECONOMICS MONETARY POLICY NEGATIVE EFFECT NEGATIVE IMPACT NOMINAL DEPRECIATION NOMINAL EXCHANGE RATE OPEN CAPITAL ACCOUNT OPEN ECONOMIES OVERVALUATION PER CAPITA GROWTH PER CAPITA INCOME PER CAPITA INCOMES POLICY INSTRUMENTS POLICY INTERVENTION POLICY MAKERS POLICY RESEARCH POVERTY REDUCTION PRIVATE INVESTMENT PURCHASING POWER PURCHASING POWER PARITY REAL DEVALUATION REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATE MISALIGNMENTS REAL EXCHANGE RATE OVERVALUATION REAL EXCHANGE RATE VOLATILITY RELATIVE PRICE RELATIVE PRICES RESERVE RESERVE ACCUMULATION RESERVES RETURN SIGNIFICANT EFFECT STANDARD DEVIATION SUSTAINABLE GROWTH SUSTAINED GROWTH TRADABLE GOODS UNCERTAINTY WORLD ECONOMY
Online Access:	http://documents.worldbank.org/curated/en/2010/06/12540810/can-real-exchange-rate-undervaluation-boost-exports-growth-developing-countries-yes-not-long http://hdl.handle.net/10986/10178

id	okr-10986-10178
recordtype	oai_dc
spelling	okr-10986-101782021-04-23T14:02:49Z Can Real Exchange Rate Undervaluation Boost Exports and Growth in Developing Countries? Yes, But Not for Long Haddad, Mona Pancaro, Cosimo ACCOUNTING ADJUSTMENT COSTS ADVANCED ECONOMIES ANNUAL GROWTH CAPITA GROWTH CAPITA INCOME CAPITAL ACCOUNT CAPITAL ACCUMULATION CAPITAL CONTROLS CAPITAL INFLOWS CAPITAL OUTFLOWS CENTRAL BANK COMPETITIVE REAL EXCHANGE RATE COMPETITIVENESS COMPLEMENTARY FACTORS CONSOLIDATION CURRENCY CURRENCY CRISES CURRENT ACCOUNT CURRENT ACCOUNT DEFICITS DEVALUATION DEVALUATIONS DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DISTORTIONS DIVERSIFIED PORTFOLIO ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC RESEARCH EMPIRICAL EVIDENCE EQUILIBRIUM EXCHANGE RATE DEPRECIATION EXCHANGE RATE DEVALUATIONS EXCHANGE RATE EXPECTATIONS EXCHANGE RATE INSTABILITY EXCHANGE RATE REGIME EXCHANGE RATE VARIABILITY EXCHANGE-RATE EXPENDITURES EXPORT VOLUMES FINANCIAL CRISIS FINANCIAL DEVELOPMENT FINANCIAL INSTABILITY FINANCIAL INSTRUMENTS FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SYSTEMS FIXED EFFECTS FOREIGN EXCHANGE FOREIGN EXCHANGE MARKETS FOREIGN RESERVE FOREIGN RESERVES GROWTH MODEL IMPLICIT TAX INCOME GROWTH INCOME LEVELS INDUSTRIALIZED COUNTRIES INFLATION INTEREST RATE INTEREST RATE VOLATILITY INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL MARKETS INTERNATIONAL MONETARY FUND INTERNATIONAL MONEY INVESTMENT HORIZONS LEVY LIBERALIZATION LIBERALIZATION OF CAPITAL LIQUIDITY LONG RUN LONG TERM LOW-INCOME COUNTRIES MACROECONOMIC STABILITY MARKET FAILURES MARKET FORCES MEDIUM TERM MISALIGNMENTS MONETARY ECONOMICS MONETARY POLICY NEGATIVE EFFECT NEGATIVE IMPACT NOMINAL DEPRECIATION NOMINAL EXCHANGE RATE OPEN CAPITAL ACCOUNT OPEN ECONOMIES OVERVALUATION PER CAPITA GROWTH PER CAPITA INCOME PER CAPITA INCOMES POLICY INSTRUMENTS POLICY INTERVENTION POLICY MAKERS POLICY RESEARCH POVERTY REDUCTION PRIVATE INVESTMENT PURCHASING POWER PURCHASING POWER PARITY REAL DEVALUATION REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATE MISALIGNMENTS REAL EXCHANGE RATE OVERVALUATION REAL EXCHANGE RATE VOLATILITY RELATIVE PRICE RELATIVE PRICES RESERVE RESERVE ACCUMULATION RESERVES RETURN SIGNIFICANT EFFECT STANDARD DEVIATION SUSTAINABLE GROWTH SUSTAINED GROWTH TRADABLE GOODS UNCERTAINTY WORLD ECONOMY A policy of managed real undervaluation may have been an important factor behind the success of East Asia's export-led growth model. But current discussions over the value of China's currency demonstrate the controversy this kind of policy can generate. Although a managed real undervaluation can enhance domestic competitiveness, it is difficult to sustain both economically and politically in the post-crisis environment. The authors show that a real undervaluation works only for low-income countries, and only in the medium term. 2012-08-13T10:38:49Z 2012-08-13T10:38:49Z 2010-06 http://documents.worldbank.org/curated/en/2010/06/12540810/can-real-exchange-rate-undervaluation-boost-exports-growth-developing-countries-yes-not-long http://hdl.handle.net/10986/10178 English Economic Premise; No. 20 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Brief Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACCOUNTING ADJUSTMENT COSTS ADVANCED ECONOMIES ANNUAL GROWTH CAPITA GROWTH CAPITA INCOME CAPITAL ACCOUNT CAPITAL ACCUMULATION CAPITAL CONTROLS CAPITAL INFLOWS CAPITAL OUTFLOWS CENTRAL BANK COMPETITIVE REAL EXCHANGE RATE COMPETITIVENESS COMPLEMENTARY FACTORS CONSOLIDATION CURRENCY CURRENCY CRISES CURRENT ACCOUNT CURRENT ACCOUNT DEFICITS DEVALUATION DEVALUATIONS DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DISTORTIONS DIVERSIFIED PORTFOLIO ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC RESEARCH EMPIRICAL EVIDENCE EQUILIBRIUM EXCHANGE RATE DEPRECIATION EXCHANGE RATE DEVALUATIONS EXCHANGE RATE EXPECTATIONS EXCHANGE RATE INSTABILITY EXCHANGE RATE REGIME EXCHANGE RATE VARIABILITY EXCHANGE-RATE EXPENDITURES EXPORT VOLUMES FINANCIAL CRISIS FINANCIAL DEVELOPMENT FINANCIAL INSTABILITY FINANCIAL INSTRUMENTS FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SYSTEMS FIXED EFFECTS FOREIGN EXCHANGE FOREIGN EXCHANGE MARKETS FOREIGN RESERVE FOREIGN RESERVES GROWTH MODEL IMPLICIT TAX INCOME GROWTH INCOME LEVELS INDUSTRIALIZED COUNTRIES INFLATION INTEREST RATE INTEREST RATE VOLATILITY INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL MARKETS INTERNATIONAL MONETARY FUND INTERNATIONAL MONEY INVESTMENT HORIZONS LEVY LIBERALIZATION LIBERALIZATION OF CAPITAL LIQUIDITY LONG RUN LONG TERM LOW-INCOME COUNTRIES MACROECONOMIC STABILITY MARKET FAILURES MARKET FORCES MEDIUM TERM MISALIGNMENTS MONETARY ECONOMICS MONETARY POLICY NEGATIVE EFFECT NEGATIVE IMPACT NOMINAL DEPRECIATION NOMINAL EXCHANGE RATE OPEN CAPITAL ACCOUNT OPEN ECONOMIES OVERVALUATION PER CAPITA GROWTH PER CAPITA INCOME PER CAPITA INCOMES POLICY INSTRUMENTS POLICY INTERVENTION POLICY MAKERS POLICY RESEARCH POVERTY REDUCTION PRIVATE INVESTMENT PURCHASING POWER PURCHASING POWER PARITY REAL DEVALUATION REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATE MISALIGNMENTS REAL EXCHANGE RATE OVERVALUATION REAL EXCHANGE RATE VOLATILITY RELATIVE PRICE RELATIVE PRICES RESERVE RESERVE ACCUMULATION RESERVES RETURN SIGNIFICANT EFFECT STANDARD DEVIATION SUSTAINABLE GROWTH SUSTAINED GROWTH TRADABLE GOODS UNCERTAINTY WORLD ECONOMY
spellingShingle	ACCOUNTING ADJUSTMENT COSTS ADVANCED ECONOMIES ANNUAL GROWTH CAPITA GROWTH CAPITA INCOME CAPITAL ACCOUNT CAPITAL ACCUMULATION CAPITAL CONTROLS CAPITAL INFLOWS CAPITAL OUTFLOWS CENTRAL BANK COMPETITIVE REAL EXCHANGE RATE COMPETITIVENESS COMPLEMENTARY FACTORS CONSOLIDATION CURRENCY CURRENCY CRISES CURRENT ACCOUNT CURRENT ACCOUNT DEFICITS DEVALUATION DEVALUATIONS DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DISTORTIONS DIVERSIFIED PORTFOLIO ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC RESEARCH EMPIRICAL EVIDENCE EQUILIBRIUM EXCHANGE RATE DEPRECIATION EXCHANGE RATE DEVALUATIONS EXCHANGE RATE EXPECTATIONS EXCHANGE RATE INSTABILITY EXCHANGE RATE REGIME EXCHANGE RATE VARIABILITY EXCHANGE-RATE EXPENDITURES EXPORT VOLUMES FINANCIAL CRISIS FINANCIAL DEVELOPMENT FINANCIAL INSTABILITY FINANCIAL INSTRUMENTS FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SYSTEMS FIXED EFFECTS FOREIGN EXCHANGE FOREIGN EXCHANGE MARKETS FOREIGN RESERVE FOREIGN RESERVES GROWTH MODEL IMPLICIT TAX INCOME GROWTH INCOME LEVELS INDUSTRIALIZED COUNTRIES INFLATION INTEREST RATE INTEREST RATE VOLATILITY INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL MARKETS INTERNATIONAL MONETARY FUND INTERNATIONAL MONEY INVESTMENT HORIZONS LEVY LIBERALIZATION LIBERALIZATION OF CAPITAL LIQUIDITY LONG RUN LONG TERM LOW-INCOME COUNTRIES MACROECONOMIC STABILITY MARKET FAILURES MARKET FORCES MEDIUM TERM MISALIGNMENTS MONETARY ECONOMICS MONETARY POLICY NEGATIVE EFFECT NEGATIVE IMPACT NOMINAL DEPRECIATION NOMINAL EXCHANGE RATE OPEN CAPITAL ACCOUNT OPEN ECONOMIES OVERVALUATION PER CAPITA GROWTH PER CAPITA INCOME PER CAPITA INCOMES POLICY INSTRUMENTS POLICY INTERVENTION POLICY MAKERS POLICY RESEARCH POVERTY REDUCTION PRIVATE INVESTMENT PURCHASING POWER PURCHASING POWER PARITY REAL DEVALUATION REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATE MISALIGNMENTS REAL EXCHANGE RATE OVERVALUATION REAL EXCHANGE RATE VOLATILITY RELATIVE PRICE RELATIVE PRICES RESERVE RESERVE ACCUMULATION RESERVES RETURN SIGNIFICANT EFFECT STANDARD DEVIATION SUSTAINABLE GROWTH SUSTAINED GROWTH TRADABLE GOODS UNCERTAINTY WORLD ECONOMY Haddad, Mona Pancaro, Cosimo Can Real Exchange Rate Undervaluation Boost Exports and Growth in Developing Countries? Yes, But Not for Long
relation	Economic Premise; No. 20
description	A policy of managed real undervaluation may have been an important factor behind the success of East Asia's export-led growth model. But current discussions over the value of China's currency demonstrate the controversy this kind of policy can generate. Although a managed real undervaluation can enhance domestic competitiveness, it is difficult to sustain both economically and politically in the post-crisis environment. The authors show that a real undervaluation works only for low-income countries, and only in the medium term.
format	Publications & Research :: Brief
author	Haddad, Mona Pancaro, Cosimo
author_facet	Haddad, Mona Pancaro, Cosimo
author_sort	Haddad, Mona
title	Can Real Exchange Rate Undervaluation Boost Exports and Growth in Developing Countries? Yes, But Not for Long
title_short	Can Real Exchange Rate Undervaluation Boost Exports and Growth in Developing Countries? Yes, But Not for Long
title_full	Can Real Exchange Rate Undervaluation Boost Exports and Growth in Developing Countries? Yes, But Not for Long
title_fullStr	Can Real Exchange Rate Undervaluation Boost Exports and Growth in Developing Countries? Yes, But Not for Long
title_full_unstemmed	Can Real Exchange Rate Undervaluation Boost Exports and Growth in Developing Countries? Yes, But Not for Long
title_sort	can real exchange rate undervaluation boost exports and growth in developing countries? yes, but not for long
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2010/06/12540810/can-real-exchange-rate-undervaluation-boost-exports-growth-developing-countries-yes-not-long http://hdl.handle.net/10986/10178
_version_	1764412139343183872

Can Real Exchange Rate Undervaluation Boost Exports and Growth in Developing Countries? Yes, But Not for Long

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