| Title: | Capital flows, exchange rate flexibility, and the real exchange rate (2022) |
| Authors: | Jean-Louis Combes, Author ; Patrick Plane, Author |
| In : | Journal of macroeconomics (Vol. 34 N°4, December 2012) |
| Article on page: | pp. 1034-1043 |
| Languages: | English |
| Descriptors: |
[Eurovoc] FINANCE > financing and investment > investment > foreign investment [Eurovoc] FINANCE > free movement of capital > free movement of capital > capital movement [Eurovoc] FINANCE > monetary economics > exchange policy > exchange rate |
| Abstract: | This paper first analyzes the impact of capital inflows on the real effective exchange rate for a sample of 42 emerging and developing countries over the period 1980–2006. The results from the pooled mean group estimator show that both public and private inflows are associated with an appreciation of the real effective exchange rate. Among private inflows, portfolio investments display the biggest impact on the appreciation – almost seven times that of foreign direct investment or bank loans – while private transfers have the smallest effect. The paper also shows that a more flexible exchange rate regime, measured by different indicators, could effectively dampen the real appreciation associated with capital inflows, supporting countries’ competitiveness. |
| Contents note: |
Highlights
The real effective exchange rate appreciates with capital flows. Portfolio investment has the biggest appreciation effect. A flexible exchange rate dampens appreciation of the exchange rate. |
| Doi : |
DOI : 10.1016/j.jmacro.2012.08.001 
|
| Axe de recherche : | Intégration des pays en développement dans l'économie mondialisée |
| Link for e-copy: | https://www.sciencedirect.com/science/article/abs/pii/S0164070412000833?via%3Dihub |
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