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

Cover Image

QR Code

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...

Full description

Bibliographic Details
Main Authors:	Haddad, Mona, Pancaro, Cosimo
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

Description
Summary:	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.