International Financial Integration and Real Exchange Rate Long-Run Dynamics in Emerging Countries
The aim of this paper is to provide new empirical evidence on the impact of international financial integration on the long-run Real Exchange Rate (RER) in 39 developing countries belonging to three different geographical regions (Latin America, Asia and MENA). It covers the period 1979-2004, and carries out "second-generation" tests for non-stationary panels. Several factors, including international financial integration, are shown to drive the long-run RER in emerging countries. It is found that the new financial environment characterised by international financial integration leads to a depreciation of the RER in the long run. Further, RER misalignments take the form of an under-valuation in most MENA countries and an over-valuation in most Latin American and Asian countries
Year of publication: |
2009-09-01
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Authors: | Rault, Christophe ; Caporale, Guglielmo Maria ; Amor, Thouraya Hadj |
Subject: | emerging economies | real exchange rate | financial integration | misalignment | second-generation panel unit-root and cointegration tests | Business and Economics |
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freely available