Factores Macroecon�micos en Retornos Accionarios Chilenos

Abstract

We evaluate the growth effects of real exchange rate (RER) misalignments and their volatility. We calculate RER misaligments as deviations of actual RERs from their equilibrium for 60 countries over 1965-2003 using panel and time series cointegration methods. Using dynamic panel data techniques we find that RER misalignments hinder growth but the effect is non-linear: growth declines are larger, the larger the size of the overvaluation. Although large undervaluations hurt growth, small to moderate undervaluations enhance growth. However, we find that it is difficult to follow a pro-growth RER policy. Finally, growth is hampered by highly volatile RER misalignments.