Linkaging the indirect effects of exchange rate to economic growth and poverty through economic performance in developing countries
<p>This study examines the effects of exchange rate depreciation on economic performance, which</p><p>indirectly affects economic growth and poverty reduction in 11 developing countries by using annual</p><p>data during 1980-2016....
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| Format: | thesis |
| Language: | eng |
| Published: |
2020
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| Subjects: | |
| Online Access: | https://ir.upsi.edu.my/detailsg.php?det=8675 |
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| Summary: | <p>This study examines the effects of exchange rate depreciation on economic performance, which</p><p>indirectly affects economic growth and poverty reduction in 11 developing countries by using annual</p><p>data during 1980-2016. Three methods of analysis, namely Autoregressive Distributed Lag (ARDL),</p><p>Fully Modified Ordinary Least Squares (FMOLS), and Panel Autoregressive Distributed Lag (P-ARDL)</p><p>applied for analysing eight models constructed. The nominal exchange rate is the main interest</p><p>variable in the economic performance model. Foreign direct investment, international reserve, and</p><p>trade balance are the main interest variables in the economic growth model and poverty reduction</p><p>model, respectively. By considering the incidence of the structural break, the results of</p><p>time-series analysis using the ARDL method shows that the nominal exchange rate contributes</p><p>positively to foreign direct investment in 7 countries. The results also show the nominal exchange</p><p>rate negatively affects international reserve in the short run, then has a positive effect in the</p><p>long-run in 5 countries. Other findings of the study prove that the nominal exchange rate improves</p><p>trade balance in the short-run, but it worsens trade balance in the long-run in 8 countries. Having</p><p>Cumulative Sum (CUSUM) and Cumulative Sum of Squares (CUSUMSQ) tests, the results show that the</p><p>structures of three models of economic performance are stable. The results of FMOLS show a negative</p><p>long-run relationship between gross domestic product and foreign direct investment as well as</p><p>international reserve, but a positive long-run relationship between gross domestic product and</p><p>trade balance. The results of P-ARDL show that per capita income is influenced positively by</p><p>foreign direct investment, international reserve, trade balance, and remittance. This study calls</p><p>for a rethinking of the importance of foreign direct investment and international reserve in</p><p>boosting economic growth. The developing countries should rethink the negative-sides incurred for</p><p>economic growth rather than pursuing foreign</p><p>direct investment and hoarding international reserves.</p><p></p> |
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