Exchange rate misalignment, exchange rate volatility and economic growth: an analysis for the Brazilian economy

Vol. 36 No. 4 (2016)

Oct-Dec / 2016
Published October 1, 2016
PDF-Portuguese (Pt-BR)
PDF-Portuguese (Pt-BR)

How to Cite

Vilela Vieira, Flávio, and Aderbal Oliveira Damasceno. 2016. “Exchange Rate Misalignment, Exchange Rate Volatility and Economic Growth: An Analysis for the Brazilian Economy”. Brazilian Journal of Political Economy 36 (4), 704-25. https://doi.org/10.1590/0101-31572016v36n04a03.

Exchange rate misalignment, exchange rate volatility and economic growth: an analysis for the Brazilian economy

Flávio Vilela Vieira
Instituto de Economia - Universidade Federal de Uberlândia, Pesquisador CNPq e FAPEM IG,
Aderbal Oliveira Damasceno
Instituto de Economia - Universidade Federal de Uberlândia, Pesquisador CNPq e FAPEM IG,
Brazilian Journal of Political Economy, Vol. 36 No. 4 (2016), Oct-Dec / 2016, Pages 704-725

Abstract

The goal of this work is to investigate the relevance of exchange rate misalignment and volatility for the Brazilian growth rate for the period of 1995 to 2011. The evidence suggest: i) the exchange rate misalignment is relevant to explain economic growth for the Brazilian economy and exchange rate under depreciation (over appreciation) foster (mitigates) economic growth; ii) exchange rate volatility is relevant to explain economic growth for the Brazilian economy and higher (lower) exchange rate volatility mitigates (foster) economic growth; iii) changes in the investment rate and the growth rate of exports have positive estimated coefficients for the growth model. As a recommendation policy, the suggestion is to keep the real exchange rate at a competitive level with low volatility. 

JEL Classification: O40; F31; C26.


Keywords: Exchange Rate Misalignment, Exchange Rate Volatility, Economic Growth