Real Exchange Rates, Saving, and Growth : Is There a Link?

The view that policies directed at the real exchange rate can have an important effect on economic growth has been gaining adherents in recent years. Unlike the traditional 'misalignment' view that temporary departures of the real exchang...

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Bibliographic Details
Main Authors: Montiel, Peter J., Servén, Luis
Format: Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2017
Subjects:
GDP
GNP
NPL
TAX
Online Access:http://documents.worldbank.org/curated/en/894531468151502121/Real-exchange-rates-saving-and-growth-is-there-a-link
http://hdl.handle.net/10986/27929
id okr-10986-27929
recordtype oai_dc
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
en_US
topic AGGREGATE DEMAND
BALANCE OF PAYMENTS
BANK POLICY
BONDS
BUDGET CONSTRAINT
CAPITA INCOME
CAPITAL ACCUMULATION
CAPITAL FLOWS
CAPITAL GAINS
CAPITAL MOBILITY
CAPITAL MOVEMENTS
CAPITAL STOCK
CENTRAL BANK
COMPARATIVE ANALYSIS
CONSUMER CREDIT
CONSUMPTION EXPENDITURE
CONSUMPTION EXPENDITURES
CONSUMPTION LEVELS
CONSUMPTION SMOOTHING
CORPORATE PROFITS
CORPORATE SAVING
CURRENT ACCOUNT
CURRENT ACCOUNT BALANCE
CURRENT ACCOUNT DEFICIT
CURRENT ACCOUNT SURPLUSES
DEMAND FOR MONEY
DEMOGRAPHIC
DEVELOPING COUNTRIES
DEVELOPMENT ECONOMICS
DEVELOPMENT POLICY
DEVELOPMENT STRATEGY
DISEQUILIBRIUM
DISPOSABLE INCOME
DIVIDENDS
DOLLAR PRICE
DOLLAR PRICES
DOMESTIC CAPITAL
DOMESTIC COMPETITION
DOMESTIC ECONOMY
DOMESTIC INFLATION
DOMESTIC MARKETS
ECONOMIC DEVELOPMENT
ECONOMIC GROWTH
ECONOMIC POLICY
ECONOMIC REFORM
ECONOMIC RESEARCH
ECONOMIC REVIEW
EMPIRICAL EVIDENCE
EMPIRICAL STUDIES
ENDOGENOUS VARIABLES
ENVIRONMENTAL BENEFITS
EQUILIBRIUM
EQUILIBRIUM VALUE
EQUILIBRIUM VALUES
EXCESS DEMAND
EXCESS SUPPLY
EXCHANGE RATE DEPRECIATION
EXCHANGE RATE POLICIES
EXCHANGE RATE POLICY
EXCHANGE RATE REGIMES
EXCHANGE RATE SYSTEM
EXOGENOUS SHOCKS
EXOGENOUS VARIABLES
FEDERAL RESERVE
FEDERAL RESERVE BANK
FINANCIAL DEVELOPMENT
FINANCIAL INSTITUTION
FINANCIAL MARKETS
FINANCIAL REFORM
FINANCIAL SAVING
FINANCIAL SECTOR
FINANCIAL SECTOR STABILITY
FINANCIAL STRUCTURE
FINANCIAL SYSTEM
FINANCIAL SYSTEMS
FINANCIALLY OPEN ECONOMIES
FISCAL POLICIES
FISCAL POLICY
FIXED EXCHANGE RATE
FOREIGN FINANCING
FORMAL FINANCIAL SECTOR
FUTURE GROWTH
GDP
GDP DEFLATOR
GDP PER CAPITA
GLOBAL ECONOMY
GLOBALIZATION
GNP
GROWTH RATE
GROWTH RATE OF INCOME
GROWTH RATES
HIGH INFLATION
HOLDING
HOLDINGS
HOUSEHOLD INCOME
HOUSEHOLD SAVING
HOUSEHOLD SAVING RATE
INCOME DISTRIBUTION
INCOME LEVEL
INCOME LEVELS
INCOMES
INDUSTRIAL COUNTRIES
INFLATION RATE
INSTRUMENT
INTEREST RATES
INTERNATIONAL BANK
INTERNATIONAL BORROWING
INTERNATIONAL CAPITAL
INTERNATIONAL CAPITAL FLOWS
INTERNATIONAL DEVELOPMENT
INTERNATIONAL ECONOMICS
INTERNATIONAL EXPERIENCE
INTERNATIONAL FINANCIAL MARKETS
INTERNATIONAL INVESTMENT
INTERNATIONAL MONETARY FUND
INTERNATIONAL PORTFOLIO
INVESTMENT RATES
LIQUIDITY
LIQUIDITY CONSTRAINTS
LONG TERM
LOW-INCOME COUNTRIES
MACRO STABILITY
MACROECONOMIC ANALYSIS
MACROECONOMIC ENVIRONMENT
MACROECONOMIC IMPACT
MACROECONOMIC MANAGEMENT
MACROECONOMIC MODELS
MACROECONOMIC PERFORMANCE
MACROECONOMIC POLICY
MACROECONOMICS
MARGINAL UTILITY
MONETARY FUND
NATIONAL SAVING
NATURAL RESOURCES
NOMINAL EXCHANGE RATE
NOMINAL INTEREST RATE
NPL
OLD AGE CRISIS
OPEN ECONOMIES
OPEN ECONOMY
OPPORTUNITY COST
OUTPUT
OVERVALUATION
PENSION
PER CAPITA INCOME
PERMANENT INCOME
POLITICAL ECONOMY
POLITICAL ECONOMY OF REFORM
PORTFOLIO DIVERSIFICATION
POSITIVE EFFECTS
POSTAL SAVING
POVERTY REDUCTION
PRIVATE CONSUMPTION
PRIVATE INFRASTRUCTURE
PRIVATE SAVING
PRODUCTIVITY
PRODUCTIVITY GROWTH
PROVIDENT FUND
PROVIDENT FUNDS
PUBLIC ECONOMICS
PUBLIC POLICY
PUBLIC SAVING
PUBLIC SECTOR
RAPID ECONOMIC GROWTH
RAPID GROWTH
RATE OF GROWTH
RATE OF INFLATION
RATE OF INVESTMENT
RATE TARGETING
REAL APPRECIATION
REAL EXCHANGE
REAL EXCHANGE RATE
REAL EXCHANGE RATE VOLATILITY
REAL EXCHANGE RATES
REAL INCOME
REAL INTEREST
REAL INTEREST RATE
REAL INTEREST RATES
REAL WAGES
RELATIVE PRICE
RESERVE
RESTRICTIONS ON ENTRY
RETURN
RISK PREMIUM
SAVING RATES
SAVINGS
SAVINGS RATES
SMALL SAVERS
STABLE INFLATION
SUSTAINED GROWTH
TAX
TAX INCENTIVES
TRADE BALANCE
TRADING
TRANSACTION
TRANSACTION COSTS
TRANSACTIONS COSTS
UTILITY FUNCTION
WEALTH
spellingShingle AGGREGATE DEMAND
BALANCE OF PAYMENTS
BANK POLICY
BONDS
BUDGET CONSTRAINT
CAPITA INCOME
CAPITAL ACCUMULATION
CAPITAL FLOWS
CAPITAL GAINS
CAPITAL MOBILITY
CAPITAL MOVEMENTS
CAPITAL STOCK
CENTRAL BANK
COMPARATIVE ANALYSIS
CONSUMER CREDIT
CONSUMPTION EXPENDITURE
CONSUMPTION EXPENDITURES
CONSUMPTION LEVELS
CONSUMPTION SMOOTHING
CORPORATE PROFITS
CORPORATE SAVING
CURRENT ACCOUNT
CURRENT ACCOUNT BALANCE
CURRENT ACCOUNT DEFICIT
CURRENT ACCOUNT SURPLUSES
DEMAND FOR MONEY
DEMOGRAPHIC
DEVELOPING COUNTRIES
DEVELOPMENT ECONOMICS
DEVELOPMENT POLICY
DEVELOPMENT STRATEGY
DISEQUILIBRIUM
DISPOSABLE INCOME
DIVIDENDS
DOLLAR PRICE
DOLLAR PRICES
DOMESTIC CAPITAL
DOMESTIC COMPETITION
DOMESTIC ECONOMY
DOMESTIC INFLATION
DOMESTIC MARKETS
ECONOMIC DEVELOPMENT
ECONOMIC GROWTH
ECONOMIC POLICY
ECONOMIC REFORM
ECONOMIC RESEARCH
ECONOMIC REVIEW
EMPIRICAL EVIDENCE
EMPIRICAL STUDIES
ENDOGENOUS VARIABLES
ENVIRONMENTAL BENEFITS
EQUILIBRIUM
EQUILIBRIUM VALUE
EQUILIBRIUM VALUES
EXCESS DEMAND
EXCESS SUPPLY
EXCHANGE RATE DEPRECIATION
EXCHANGE RATE POLICIES
EXCHANGE RATE POLICY
EXCHANGE RATE REGIMES
EXCHANGE RATE SYSTEM
EXOGENOUS SHOCKS
EXOGENOUS VARIABLES
FEDERAL RESERVE
FEDERAL RESERVE BANK
FINANCIAL DEVELOPMENT
FINANCIAL INSTITUTION
FINANCIAL MARKETS
FINANCIAL REFORM
FINANCIAL SAVING
FINANCIAL SECTOR
FINANCIAL SECTOR STABILITY
FINANCIAL STRUCTURE
FINANCIAL SYSTEM
FINANCIAL SYSTEMS
FINANCIALLY OPEN ECONOMIES
FISCAL POLICIES
FISCAL POLICY
FIXED EXCHANGE RATE
FOREIGN FINANCING
FORMAL FINANCIAL SECTOR
FUTURE GROWTH
GDP
GDP DEFLATOR
GDP PER CAPITA
GLOBAL ECONOMY
GLOBALIZATION
GNP
GROWTH RATE
GROWTH RATE OF INCOME
GROWTH RATES
HIGH INFLATION
HOLDING
HOLDINGS
HOUSEHOLD INCOME
HOUSEHOLD SAVING
HOUSEHOLD SAVING RATE
INCOME DISTRIBUTION
INCOME LEVEL
INCOME LEVELS
INCOMES
INDUSTRIAL COUNTRIES
INFLATION RATE
INSTRUMENT
INTEREST RATES
INTERNATIONAL BANK
INTERNATIONAL BORROWING
INTERNATIONAL CAPITAL
INTERNATIONAL CAPITAL FLOWS
INTERNATIONAL DEVELOPMENT
INTERNATIONAL ECONOMICS
INTERNATIONAL EXPERIENCE
INTERNATIONAL FINANCIAL MARKETS
INTERNATIONAL INVESTMENT
INTERNATIONAL MONETARY FUND
INTERNATIONAL PORTFOLIO
INVESTMENT RATES
LIQUIDITY
LIQUIDITY CONSTRAINTS
LONG TERM
LOW-INCOME COUNTRIES
MACRO STABILITY
MACROECONOMIC ANALYSIS
MACROECONOMIC ENVIRONMENT
MACROECONOMIC IMPACT
MACROECONOMIC MANAGEMENT
MACROECONOMIC MODELS
MACROECONOMIC PERFORMANCE
MACROECONOMIC POLICY
MACROECONOMICS
MARGINAL UTILITY
MONETARY FUND
NATIONAL SAVING
NATURAL RESOURCES
NOMINAL EXCHANGE RATE
NOMINAL INTEREST RATE
NPL
OLD AGE CRISIS
OPEN ECONOMIES
OPEN ECONOMY
OPPORTUNITY COST
OUTPUT
OVERVALUATION
PENSION
PER CAPITA INCOME
PERMANENT INCOME
POLITICAL ECONOMY
POLITICAL ECONOMY OF REFORM
PORTFOLIO DIVERSIFICATION
POSITIVE EFFECTS
POSTAL SAVING
POVERTY REDUCTION
PRIVATE CONSUMPTION
PRIVATE INFRASTRUCTURE
PRIVATE SAVING
PRODUCTIVITY
PRODUCTIVITY GROWTH
PROVIDENT FUND
PROVIDENT FUNDS
PUBLIC ECONOMICS
PUBLIC POLICY
PUBLIC SAVING
PUBLIC SECTOR
RAPID ECONOMIC GROWTH
RAPID GROWTH
RATE OF GROWTH
RATE OF INFLATION
RATE OF INVESTMENT
RATE TARGETING
REAL APPRECIATION
REAL EXCHANGE
REAL EXCHANGE RATE
REAL EXCHANGE RATE VOLATILITY
REAL EXCHANGE RATES
REAL INCOME
REAL INTEREST
REAL INTEREST RATE
REAL INTEREST RATES
REAL WAGES
RELATIVE PRICE
RESERVE
RESTRICTIONS ON ENTRY
RETURN
RISK PREMIUM
SAVING RATES
SAVINGS
SAVINGS RATES
SMALL SAVERS
STABLE INFLATION
SUSTAINED GROWTH
TAX
TAX INCENTIVES
TRADE BALANCE
TRADING
TRANSACTION
TRANSACTION COSTS
TRANSACTIONS COSTS
UTILITY FUNCTION
WEALTH
Montiel, Peter J.
Servén, Luis
Real Exchange Rates, Saving, and Growth : Is There a Link?
relation Commission on Growth and Development Working Paper;No. 46
description The view that policies directed at the real exchange rate can have an important effect on economic growth has been gaining adherents in recent years. Unlike the traditional 'misalignment' view that temporary departures of the real exchange rate from its equilibrium level harm growth by distorting a key relative price in the economy, the recent literature stresses the growth effects of the equilibrium real exchange rate itself, with the claim being that a depreciated equilibrium real exchange rate promotes economic growth. While there is no consensus on the precise channels through which this effect is generated, an increasingly common view in policy circles points to saving as the channel of transmission, with the claim that a depreciated real exchange rate raises the domestic saving rate which in turn stimulates growth by increasing the rate of capital accumulation. This paper offers a preliminary exploration of this claim. Drawing from standard analytical models, stylized facts on saving and real exchange rates, and existing empirical research on saving determinants, the paper assesses the link between the real exchange rate and saving. Overall, the conclusion is that saving is unlikely to provide the mechanism through which the real exchange rate affects growth.
format Working Paper
author Montiel, Peter J.
Servén, Luis
author_facet Montiel, Peter J.
Servén, Luis
author_sort Montiel, Peter J.
title Real Exchange Rates, Saving, and Growth : Is There a Link?
title_short Real Exchange Rates, Saving, and Growth : Is There a Link?
title_full Real Exchange Rates, Saving, and Growth : Is There a Link?
title_fullStr Real Exchange Rates, Saving, and Growth : Is There a Link?
title_full_unstemmed Real Exchange Rates, Saving, and Growth : Is There a Link?
title_sort real exchange rates, saving, and growth : is there a link?
publisher World Bank, Washington, DC
publishDate 2017
url http://documents.worldbank.org/curated/en/894531468151502121/Real-exchange-rates-saving-and-growth-is-there-a-link
http://hdl.handle.net/10986/27929
_version_ 1764465520359243776
spelling okr-10986-279292021-04-23T14:04:45Z Real Exchange Rates, Saving, and Growth : Is There a Link? Montiel, Peter J. Servén, Luis AGGREGATE DEMAND BALANCE OF PAYMENTS BANK POLICY BONDS BUDGET CONSTRAINT CAPITA INCOME CAPITAL ACCUMULATION CAPITAL FLOWS CAPITAL GAINS CAPITAL MOBILITY CAPITAL MOVEMENTS CAPITAL STOCK CENTRAL BANK COMPARATIVE ANALYSIS CONSUMER CREDIT CONSUMPTION EXPENDITURE CONSUMPTION EXPENDITURES CONSUMPTION LEVELS CONSUMPTION SMOOTHING CORPORATE PROFITS CORPORATE SAVING CURRENT ACCOUNT CURRENT ACCOUNT BALANCE CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT SURPLUSES DEMAND FOR MONEY DEMOGRAPHIC DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DEVELOPMENT STRATEGY DISEQUILIBRIUM DISPOSABLE INCOME DIVIDENDS DOLLAR PRICE DOLLAR PRICES DOMESTIC CAPITAL DOMESTIC COMPETITION DOMESTIC ECONOMY DOMESTIC INFLATION DOMESTIC MARKETS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICY ECONOMIC REFORM ECONOMIC RESEARCH ECONOMIC REVIEW EMPIRICAL EVIDENCE EMPIRICAL STUDIES ENDOGENOUS VARIABLES ENVIRONMENTAL BENEFITS EQUILIBRIUM EQUILIBRIUM VALUE EQUILIBRIUM VALUES EXCESS DEMAND EXCESS SUPPLY EXCHANGE RATE DEPRECIATION EXCHANGE RATE POLICIES EXCHANGE RATE POLICY EXCHANGE RATE REGIMES EXCHANGE RATE SYSTEM EXOGENOUS SHOCKS EXOGENOUS VARIABLES FEDERAL RESERVE FEDERAL RESERVE BANK FINANCIAL DEVELOPMENT FINANCIAL INSTITUTION FINANCIAL MARKETS FINANCIAL REFORM FINANCIAL SAVING FINANCIAL SECTOR FINANCIAL SECTOR STABILITY FINANCIAL STRUCTURE FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCIALLY OPEN ECONOMIES FISCAL POLICIES FISCAL POLICY FIXED EXCHANGE RATE FOREIGN FINANCING FORMAL FINANCIAL SECTOR FUTURE GROWTH GDP GDP DEFLATOR GDP PER CAPITA GLOBAL ECONOMY GLOBALIZATION GNP GROWTH RATE GROWTH RATE OF INCOME GROWTH RATES HIGH INFLATION HOLDING HOLDINGS HOUSEHOLD INCOME HOUSEHOLD SAVING HOUSEHOLD SAVING RATE INCOME DISTRIBUTION INCOME LEVEL INCOME LEVELS INCOMES INDUSTRIAL COUNTRIES INFLATION RATE INSTRUMENT INTEREST RATES INTERNATIONAL BANK INTERNATIONAL BORROWING INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL FLOWS INTERNATIONAL DEVELOPMENT INTERNATIONAL ECONOMICS INTERNATIONAL EXPERIENCE INTERNATIONAL FINANCIAL MARKETS INTERNATIONAL INVESTMENT INTERNATIONAL MONETARY FUND INTERNATIONAL PORTFOLIO INVESTMENT RATES LIQUIDITY LIQUIDITY CONSTRAINTS LONG TERM LOW-INCOME COUNTRIES MACRO STABILITY MACROECONOMIC ANALYSIS MACROECONOMIC ENVIRONMENT MACROECONOMIC IMPACT MACROECONOMIC MANAGEMENT MACROECONOMIC MODELS MACROECONOMIC PERFORMANCE MACROECONOMIC POLICY MACROECONOMICS MARGINAL UTILITY MONETARY FUND NATIONAL SAVING NATURAL RESOURCES NOMINAL EXCHANGE RATE NOMINAL INTEREST RATE NPL OLD AGE CRISIS OPEN ECONOMIES OPEN ECONOMY OPPORTUNITY COST OUTPUT OVERVALUATION PENSION PER CAPITA INCOME PERMANENT INCOME POLITICAL ECONOMY POLITICAL ECONOMY OF REFORM PORTFOLIO DIVERSIFICATION POSITIVE EFFECTS POSTAL SAVING POVERTY REDUCTION PRIVATE CONSUMPTION PRIVATE INFRASTRUCTURE PRIVATE SAVING PRODUCTIVITY PRODUCTIVITY GROWTH PROVIDENT FUND PROVIDENT FUNDS PUBLIC ECONOMICS PUBLIC POLICY PUBLIC SAVING PUBLIC SECTOR RAPID ECONOMIC GROWTH RAPID GROWTH RATE OF GROWTH RATE OF INFLATION RATE OF INVESTMENT RATE TARGETING REAL APPRECIATION REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATE VOLATILITY REAL EXCHANGE RATES REAL INCOME REAL INTEREST REAL INTEREST RATE REAL INTEREST RATES REAL WAGES RELATIVE PRICE RESERVE RESTRICTIONS ON ENTRY RETURN RISK PREMIUM SAVING RATES SAVINGS SAVINGS RATES SMALL SAVERS STABLE INFLATION SUSTAINED GROWTH TAX TAX INCENTIVES TRADE BALANCE TRADING TRANSACTION TRANSACTION COSTS TRANSACTIONS COSTS UTILITY FUNCTION WEALTH The view that policies directed at the real exchange rate can have an important effect on economic growth has been gaining adherents in recent years. Unlike the traditional 'misalignment' view that temporary departures of the real exchange rate from its equilibrium level harm growth by distorting a key relative price in the economy, the recent literature stresses the growth effects of the equilibrium real exchange rate itself, with the claim being that a depreciated equilibrium real exchange rate promotes economic growth. While there is no consensus on the precise channels through which this effect is generated, an increasingly common view in policy circles points to saving as the channel of transmission, with the claim that a depreciated real exchange rate raises the domestic saving rate which in turn stimulates growth by increasing the rate of capital accumulation. This paper offers a preliminary exploration of this claim. Drawing from standard analytical models, stylized facts on saving and real exchange rates, and existing empirical research on saving determinants, the paper assesses the link between the real exchange rate and saving. Overall, the conclusion is that saving is unlikely to provide the mechanism through which the real exchange rate affects growth. 2017-08-17T19:40:42Z 2017-08-17T19:40:42Z 2009 Working Paper http://documents.worldbank.org/curated/en/894531468151502121/Real-exchange-rates-saving-and-growth-is-there-a-link http://hdl.handle.net/10986/27929 English en_US Commission on Growth and Development Working Paper;No. 46 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research :: Working Paper Publications & Research