Premium
On Public Investment, the Real Exchange Rate and Growth: Some Empirical Evidence from the UK and the USA
Author(s) -
Ghosh Sugata,
Mourmouras Iannis A.,
Pal Sarmistha,
Paya Ivan
Publication year - 2003
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00345
Subject(s) - economics , exchange rate , investment (military) , econometrics , monetary economics , generalized method of moments , parametric statistics , macroeconomics , panel data , mathematics , statistics , politics , political science , law
This study is based on a two‐country endogenous growth model with optimizing agents, where public investment affects the real exchange rate and the long‐run growth rate, and does so in a non‐linear fashion. Non‐parametric regression analysis of quarterly data from the UK and the USA suggests that there is a significant non‐linear relationship between public investment and the real exchange rate, and also between public investment and the growth rate. This is also supported by our parametric generalized method of moments model that jointly determines the real exchange rate, growth rate and net foreign assets in terms of public investment.