Growth and exchange rate volatility: a panel data analysis

Abstract

The aim of this article is to assess the role of Real Exchange Rate (RER) volatility on long-run economic growth for a set of 82 advanced and emerging economies, using a panel data set ranging from 1970 to 2009. With an accurate measure for exchange rate volatility, the results for the two-step system Generalized Method of Moments (GMM) panel growth models show that a more (less) volatile RER has a significant negative (positive) impact on economic growth. The results are also robust for different model specifications.