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2018 | OriginalPaper | Buchkapitel

10. Inferences on the Relationship Between Economic Growth and the Real Exchange Rate: A Meta-Analysis

verfasst von : Fentahun Baylie

Erschienen in: Determinants of Economic Growth in Africa

Verlag: Springer International Publishing

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Abstract

This study gives empirical evidence on the Balassa effect which represents the coefficient of the productivity growth variable in the relationship between productivity growth and the real exchange rate. A meta-analysis of 45 previous studies shows a large and significant magnitude of the Balassa effect under a random-effects model after correction for publication bias. Ceteris paribus, 78.68 percent of the size of the effect (effect size) of change in productivity growth was directly transmitted to the real exchange rate for countries in the sample studies. The publication bias test does not preclude the existence of an (inflated) effect size. About 63.86 percent of the variations in effect size are accounted for by differences in the sample size (precision), parameters and estimation methods used in the sample studies. The results of our study show that the marginal value of studies on the Balassa hypothesis is significantly different from zero. Therefore, policymakers should be aware of the impact of productivity growth on the real exchange rate while promoting policies of rapid economic growth.

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Vorheriges Kapitel Labour Productivity in Kenyan Manufacturing and Service Industries

Nächstes Kapitel The Balance of Trade-Economic Growth Nexus in a Panel of Member Countries of the East African Community

Nur mit Berechtigung zugänglich

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For jointly normally distributed variables, \( \frac{{r\sqrt {k - 1} }}{{\sqrt {1 - r^{2} } }}\sim t - distribution,\, k - 1 = {\text{df}} \) (Gujarati 2004).

Direct impact refers to the external version of the Balassa hypothesis which defines the real exchange rate directly in terms of productivity. The other version is called the internal Balassa hypothesis. It defines the real exchange rate indirectly in terms of relative price as a function of productivity.

A value between 0.33 and 0.17 represents a medium level effect and a value between 0.17 and 0.07 represents a weak effect. A value less than 0.07 is assumed to be insignificant.

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Titel: Inferences on the Relationship Between Economic Growth and the Real Exchange Rate: A Meta-Analysis
verfasst von: Fentahun Baylie
Verlag: Springer International Publishing
Buch: Determinants of Economic Growth in Africa
Print ISBN: 978-3-319-76492-4

Electronic ISBN: 978-3-319-76493-1

Copyright-Jahr: 2018
DOI: https://doi.org/10.1007/978-3-319-76493-1_10