Exchange Rate Volatility and Productivity Growth: The Role of Liability Dollarization

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Etat: Public
Version: de l'auteur
ID Serval
serval:BIB_4BABB6B2919E
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Institution
Titre
Exchange Rate Volatility and Productivity Growth: The Role of Liability Dollarization
Périodique
Open Economies Review
Auteur(s)
Benhima K.
ISSN
1573-708X (Online)
0923-7992 (Print)
Statut éditorial
Publié
Date de publication
07/2012
Peer-reviewed
Oui
Volume
23
Numéro
3
Pages
501-529
Langue
anglais
Résumé
This paper studies how liability dollarization conditions the effect of exchange rate flexibility on growth. It develops a model with credit-constrained firms facing liquidity shocks denominated in tradables while their revenues are both in tradable and nontradables. With frictions in the reallocation between tradables and nontradables, a peg is more growth-enhancing than a float in countries with dollarized debt because it stabilizes firms' cash flows and therefore allows them to face liquidity shock and complete their innovation process. However, this relative advantage diminishes when dollarization decreases. These theoretical predictions are confirmed by an empirical analysis on a panel of 76 countries spanning 1995-2004: the higher the degree of dollarization, the more negative the impact of exchange rate flexibility on growth. The empirical results are robust to various specifications and to the treatment of endogeneity.
Mots-clé
Exchange rates, Financial development, Growth, Liability dollarization
Web of science
Création de la notice
22/08/2011 15:06
Dernière modification de la notice
20/08/2019 13:59
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