Is Devaluation Expansionary or Contractionary? Empirical Evidence from Fiji

Posted: 10 Jun 2012

See all articles by Paresh Kumar Narayan

Paresh Kumar Narayan

Deakin University - School of Accounting, Economics and Finance

Seema Narayan

affiliation not provided to SSRN

Date Written: 2007

Abstract

Devaluation has been traditionally promoted as an effective tool for increasing exports and improving the external position of the devaluing country if a nominal devaluation results in expenditure switching. In this article, our aim is to model the relationship between currency devaluations and output for Fiji. Following the approach in Bahmani et al. (2002), we extend the traditional model by incorporating other monetary and fiscal policy variables. We achieve our goal by using the recently developed bounds testing approach to cointegration and the autoregressive distributed lag model and find that devaluation is expansionary in the case of Fiji.

Suggested Citation

Narayan, Paresh Kumar and Narayan, Seema, Is Devaluation Expansionary or Contractionary? Empirical Evidence from Fiji (2007). Applied Economics, Vol. 39, pp. 2589-2598, 2007, Available at SSRN: https://ssrn.com/abstract=2080537

Paresh Kumar Narayan (Contact Author)

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

Seema Narayan

affiliation not provided to SSRN ( email )

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