PhD Seminar (Econ)
Date & time
The implications of real exchange rate (RER) misalignment for economic) deviation of the RER from the level consistent with the underlying economic fundamentals, is a controversial issue in development macroeconomics. This paper contributes to this debate through a case study of Malaysia. The impact of RER misalignment on growth is examined by including it as an additional variable in the standard growth regression framework. The findings suggest that the negative impact of RER overvaluation is overwhelmed by the positive impact of undervaluation, resulting in a mild overall positive impact on long-term economic growth. The disaggregated analysis suggests that the performance of the tradable sector drives this outcome.