Fear of Appreciation
In recent years the term "fear of floating" has been used to describe exchange rate regimes that, while officially flexible, in practice intervene heavily to avoid sudden or large depreciations. However, the data reveals that in most case...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2007/11/8666366/fear-appreciation-fear-appreciation http://hdl.handle.net/10986/7560 |
| Summary: | In recent years the term "fear of
floating" has been used to describe exchange rate
regimes that, while officially flexible, in practice
intervene heavily to avoid sudden or large depreciations.
However, the data reveals that in most cases (and
increasingly so in the 2000s) intervention has been aimed at
limiting appreciations rather than depreciations, often
motivated by the neo-mercantilist view of a depreciated real
exchange rate as protection for domestic industries. As a
first step to address the broader question of whether this
view delivers on its promise, the authors examine whether
this "fear of appreciation" has a positive impact
on growth performance in developing economies. The authors
show that depreciated exchange rates appear to induce higher
growth, but that the effect, rather than through import
substitution or export booms as argued by the mercantilist
view, works largely through the deepening of domestic
savings and capital accumulation. |
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