Capital inflows and exchange rate in LDCs: The Dutch disease problem revisited
In this paper, the link between capital inflows and real exchange rate movements in LDCs is revisited theoretically and empirically. On the theoretical side we present a simple model to show that the real exchange rate depends mainly on "real fundamentals" such as terms of trade or productivity differentials. Empirically, we take into account the heterogeneity of the sample, the dynamics of the RER and the non stationary nature of the data. Capital inflows can be oil revenues, foreign aid, remittances or FDI. We show that real fundamentals are the main driving forces of real exchange rate move... Mehr ...
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Dokumenttyp: | preprint |
Erscheinungsdatum: | 2010 |
Verlag/Hrsg.: |
HAL CCSD
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Schlagwörter: | Dutch disease / capital inflows / real exchange rate / dynamic and heterogeneous panel / JEL: F - International Economics/F.F3 - International Finance/F.F3.F31 - Foreign Exchange / JEL: F - International Economics/F.F3 - International Finance/F.F3.F35 - Foreign Aid / JEL: F - International Economics/F.F4 - Macroeconomic Aspects of International Trade and Finance/F.F4.F41 - Open Economy Macroeconomics / [SHS.ECO]Humanities and Social Sciences/Economics and Finance |
Sprache: | Englisch |
Permalink: | https://search.fid-benelux.de/Record/base-26641638 |
Datenquelle: | BASE; Originalkatalog |
Powered By: | BASE |
Link(s) : | https://shs.hal.science/halshs-00574955 |
In this paper, the link between capital inflows and real exchange rate movements in LDCs is revisited theoretically and empirically. On the theoretical side we present a simple model to show that the real exchange rate depends mainly on "real fundamentals" such as terms of trade or productivity differentials. Empirically, we take into account the heterogeneity of the sample, the dynamics of the RER and the non stationary nature of the data. Capital inflows can be oil revenues, foreign aid, remittances or FDI. We show that real fundamentals are the main driving forces of real exchange rate movements in LDCs and not capital inflows. The Balassa-Samuelson effect by itself accounts for 57% of the RER variations while capital inflows account only for 19% of RER variations. The Dutch Disease theory is not rejected but its effect on RER movements in LDCs is weak. ; Dans cet article, les liens entre flux de capitaux et taux de change réel (TCR) dans les PVD sont réexaminés théoriquement et empiriquement. Théoriquement en développant un modèle simple qui montre que le taux change réel dépend principalement des fondamentaux "réels" tels que les termes de l'échange et les différentiels de productivité, et empiriquement en prenant en compte l'hétérogénéité de l'échantillon, la dynamique du TCR, et la non-stationnarité des données. Les flux de capitaux peuvent être l'aide étrangère, les revenus du pétrole, les IDE, etc. Empiriquement, il est aussi montré que ces fondamentaux réels sont les principaux déterminants des variations du TCR comparés aux flux de capitaux. L'effet Balassa-Samuelson explique à lui seul 57% des variationsdu TCR tandis que les flux de capitaux n'expliquent que 19% de ces variations. La théorie du Dutch disease n'est pas rejetée mais son impact sur les mouvements du TCR apparaît très faible.