Abstract
In this study, we examine the competitiveness effect of currency depreciation in the presence of external commercial borrowing (ECBs) and low financial development. The estimates of autoregressive ...
Highlights
Conventional expenditure switching theories posit the expansionary impact of devaluations—that they have a positive effect on the current account
We investigate the issue in light of two underlying market imperfections—i.e., a considerable amount of private debt is denominated in foreign currency; low financial development restricts agents from borrowing domestically
We employ unit root tests, namely ADF (1979), PP (1988), and KPSS (1992), to check the stationarity of the time series and ascertain the order of integration of regressors included in the model
Summary
Conventional expenditure switching theories posit the expansionary impact of devaluations—that they have a positive effect on the current account. These small economy frameworks under a flexible exchange rate regime show the ability of currency depreciation to shift the demand. Ashis Kumar Pradhan is an Assistant Professor at Maulana Azad National Institute of Technology, Bhopal, Madhya Pradesh, India. He works in the area of open economy Macroeconomics and Financial Economics. Hiremath's areas of research interest include financial eco nomics, open economy macroeconomics and political economy with a primary focus on inter action of market efficiency, corporate finance and international capital flows
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