Evidence of the role of the real exchange rate in the growth of the GDP in Argentina (1989-2007)

Saidón, Mariana (2009): Evidence of the role of the real exchange rate in the growth of the GDP in Argentina (1989-2007).

Abstract

This paper analyzes the impact of the real exchange rate on the behavior of the GDP in Argentina in the period that goes from 1989 to 2007. In this paper, an econometric model based on the Vector Error Correction method, which proves the (lack of) relevance of different predictions made by alternate schools of domestic macroeconomic thought is proposed. The model links four non-stationary and cointegrated variables: the two mentioned variables are: the gross domestic product and the real exchange rate, and a liquid monetary aggregate (excluding time deposits) and the terms of trade. The responses of GDP to real exchange rate shocks and the terms of trade showed a similar behavior towards both the generalized impulses and other impulses arising from a Cholesky decomposition: initially, a real exchange rate shock has a negative impact on the activity that gradually decreases, and after six months it becomes positive, when it begins to gradually recover strength. The terms of trade have a positive impact after the shock and that impact loses strength over the time until it becomes negative and, cumulatively, explosive. Money- Supply shocks have a positive impact initially but there is no strong evidence regarding medium and long-term effects.

• Item Type: MPRA Paper
• Language: English
• Keywords: real exchange rate; GDP; Gross Domestic Product; VEC; Vector Error Correction; Argentina; generalized impulses
• Subjects: N - Economic History > N1 - Macroeconomics and Monetary Economics ; Industrial Structure ; Growth ; Fluctuations; N - Economic History > N1 - Macroeconomics and Monetary Economics ; Industrial Structure ; Growth ; Fluctuations > N16 - Latin America ; Caribbean; B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B22 - Macroeconomics; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925

References

Saidón, Mariana (2009): "Evidence of the role of the real exchange rate in the growth of the GDP in Argentina (1989-2007)", in Munich Personal RePEc Archive, march, 2009.