EXCHANGE RATES, GROWTH AND CONVERGENCE IN HISTORICAL PERSPECTIVE
It is well known that the exchange rate of the currency is crucial for a country’s competitiveness in international markets. Both a realistic value and stability of the exchange rate are likely to advance a country’s role in international trade and promote economic growth. Nevertheless, empirical assessments in monetary economics have usually tested this premise on the basis of short-term data. There are few studies that have taken a long-term perspective on this proposition. Consequently, it is broadly overlooked how exchange rates have influenced economic growth and convergence of income among nations in a longer perspective.
Yet, it is a common view that Japan and also parts of Western Europe did benefit from having undervalued currencies during their phases of catch-up in the 1950s and 1960s. And in recent years it has often been commented that China has long undervalued its currency in order to stimulate exports, discourage imports and build a vast strategic foreign exchange reserve. Can those cases be corroborated, are they exceptional cases, or is it possible that the exchange rate policies in certain countries in the past have equally contributed to their economic growth?
Comprehensive studies that cover a representative sample of countries across the world, and that establish when, how and where the exchange rate has mattered to paths of economic growth are still lacking. Nevertheless, it can be presumed that from the moment when countries started to use more active monetary policies in the late nineteenth century, the exchange rate arrangements became of greater importance, both for countries that had already embarked on industrialization and with sophisticated financial institutions, and for countries at lower levels of development.
Furthermore, analyses of exchange rate arrangements and growth raise other historical and methodological questions that are relevant to assessing historical paths of economic growth and convergence. For example, volatility in exchange rates and regime shifts give rise to issues such as sudden stops, while commitment to a fixed and credible exchange rate generates restrictions either to capital flows or to a fully-functioning, growth-promoting monetary policy. This makes the effect of choosing an exchange rate regime non-trivial beyond its effects on the current account.
And a fundamental methodological question concerns how to compare economic performance across time and space. It is customary in economic history to follow Angus Maddison’s lead and gauge long-term economic growth across countries on the basis of purchasing power parity (PPP) adjusted “1990 international dollars”. Still, asymmetric changes of relative prices in different countries imply that a 1990 PPP benchmark will not be representative across time. At bottom of this problem lies the issue whether the classical PPP theorem holds in the long term and consequently whether exchange rates in the long term better should approximate relative price levels than a distant PPP benchmark.
These related issues motivate a session at the WEHC. Papers presented in the session will deal with exchange rate developments and the concomitant institutional arrangement in different regions of the world over the past centuries, with the behaviour of exchange rates during periods of crisis and their link to financial stability, with political and theoretical considerations for the implementation of exchange rate arrangements, as well as with long-term measurement issues related to exchange rates and PPPs.
Draft papers for this session have been presented at a pre-conference at Lund University (Sweden), 24-25 April 2017. Yet, for the Boston session, proposals for papers are welcome until 20 December! The proposal should be a draft outline or summary of the paper of about 1500 words.
Send to Jonas.firstname.lastname@example.org; Include “Boston” in the headline of the email!
The session organizers will make a selection of papers and inform whether accepted or rejected about 10 January 2018.
- Jonas Ljungberg, Lund University, email@example.com, Sweden
- Olga Christodoulaki , vacant, firstname.lastname@example.org, Greece
- Germán Forero-Laverde, Universidad de Barcelona/Universidad Externado de Colombia, email@example.com, Spain
- André Villela, Graduate School of Economics/Fundação Getulio Vargas, Rio de Janeiro, firstname.lastname@example.org, Brazil
- Pierre van der Eng, Australian National University,Canberra/ Tsinghua University, Beijing, email@example.com, Australia
- Michael D Bordo, Rutgers University, firstname.lastname@example.org
- Julien Brault, Science-Po, Paris, email@example.com
- Liam Brunt, Norwegian School of Economics, firstname.lastname@example.org
- Antonio Fidalgo, Fresen ius University of Applied Sciences,
- Atsushi Kobayashi, Osaka Sangyo University, email@example.com
- Eric Monnet, Banque de France, firstname.lastname@example.org
- Matthias Morys, University of York, email@example.com
- Alain Naef, Cambridge University, firstname.lastname@example.org
- Anders Ögren, Lund University, email@example.com
- Alba Roldán Marin, University of Barcelona, firstname.lastname@example.org
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