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Domestic investment responses to changes in the real exchange rate: A symmetries of appreciation versus depreciation
Author(s) -
BahmaniOskooee Mohsen,
Halicioglu Ferda,
Neumann Rebecca
Publication year - 2018
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1621
Subject(s) - economics , depreciation (economics) , exchange rate , investment (military) , monetary economics , sample (material) , emerging markets , econometrics , microeconomics , macroeconomics , profit (economics) , chemistry , chromatography , financial capital , politics , political science , law , capital formation
We examine how movements in the real exchange rate impact private domestic investment. Importantly, we consider whether investment responds differently to real depreciations versus real appreciations. Using a sample of 6 emerging markets over 1980 to 2014, we show that considering asymmetric responses provides an important contribution to this literature. Previous mixed results that assume symmetric responses may be better explained by considering such asymmetric effects.