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An empirical analysis of the impacts of real exchange rate on GDP, manufacturing output and services sector in Mauritius
Author(s) -
Babubudjnauth Ashok,
Seetanah Boopen
Publication year - 2021
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.1869
Subject(s) - economics , depreciation (economics) , endogeneity , exchange rate , currency , monetary economics , real gross domestic product , short run , gross domestic product , manufacturing sector , econometrics , effective exchange rate , cointegration , macroeconomics , capital formation , microeconomics , profit (economics) , financial capital
Abstract The purpose of this study is to examine the effects of the real exchange rate (RER) movements on gross domestic product, manufacturing and services sectors growth in Mauritius. A Vector Autoregressive approach is used which accounts for both dynamics and endogeneity in the exchange‐growth modeling. In the growth model, real currency depreciation is observed to be contractionary in the short‐run while it is expansionary in the long‐run. Conversely, real home currency depreciation has expansionary effect on manufacturing output growth in the short‐run while it drops manufacturing output in the long‐run. Finally, real domestic currency depreciation has positive long term effect on services sector performance in Mauritius.