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Real Exchange Rates, Economic Complexity, and Investment, Steve Brito, Nicolas Magud, Sebastian Sosa

Abstract
We show that the response of firm-level investment to real exchange rate movements varies depending on the production structure of the economy. Firms in advanced economies and in emerging Asia increase investment when the domestic currency weakens, in line with the traditional Mundell-Fleming model. However, in other emerging market and developing economies, as well as some advanced economies with a low degree of structural economic complexity, corporate investment increases when the domestic currency strengthens. This result is consistent with Diaz Alejandro (1963)—in economies where capital goods are mostly imported, a stronger real exchange rate reduces investment costs for domestic firms
Language
eng
Literary Form
non fiction
Physical Description
1 online resource (22 pages).
Specific Material Designation
remote
Form Of Item
online
Isbn
9781484356364

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