Exchange rate undervaluation and R&D activity
Journal
Journal of International Money and Finance
Journal Volume
72
Pages
148-160
Date Issued
2017
Author(s)
Abstract
We examine how real exchange rate undervaluation policy affects research and development (R&D) activity. Using a panel data set comprising 49 developed and developing countries covering 1996–2011, we show that undervaluing the exchange rate retards technological innovation. Such a negative impact is particularly prominent for developed countries. This paper provides new insights into the real effects of undervaluation policy on the economy. An implication of our work is that countries implementing exchange rate undervaluation policy should be mindful of its potential negative effects on research and development activity.
Type
journal article