Devaluing to Prosperity – Misaligned Currencies and Their Growth Consequences by Surjit Bhalla

Devaluing to Prosperity – Misaligned Currencies and Their Growth Consequences by Surjit Bhalla

Experts have long questioned the effect of currency undervaluation on overall GDP growth. They have viewed the underlying basis for this policy--intervention in currency markets to keep the price of the home currency cheap--as doomed to failure on both theoretical and empirical grounds. Moreover, the view has been that overvalued currencies hurt economic growth but undervalued currencies cannot help in growth acceleration. A parallel belief has been that the real exchange rate--that is, a country's competitive ranking--cannot be affected by merely changing the nominal exchange rate. This view is grounded in the belief, and expectation, that inflation follows any devaluation of currency. Hence, the conclusion that the real exchange rate cannot be affected by policy. However, given China's remarkable performance in recent decades, this traditional view is being reexamined. China devalued its currency by large amounts in the 1980s and early 1990s; instead of inflation, it achieved high growth. Today, there is near-universal demand for China to significantly revalue its currency.

This book examines the veracity of various propositions relating to currency misalignments, and their effect on various items of policy interest. The author subjects more than a century of global exchange rate management and growth outcomes to rigorous empirical analysis and demonstrates convincingly that a country can systematically devalue and yet prosper. The analysis helps in interpreting several phenomena, especially for the last three decades, which have witnessed high economic growth in developing countries, a widening of global imbalances, and a sharp increase in reserve accumulation, particularly among high-growth Asian economies. The book shows that these events are strongly linked via a consistent policy of currency undervaluation in Asian economies.

Surjit S. Bhalla is managing director of Oxus Research and Investments, a New Delhi-based economic research, asset management, and emerging-markets advisory firm. He taught at the Delhi School of Economics and worked at the Rand Corporation, the Brookings Institution, and at both the research and treasury departments of the World Bank. He has also worked at Goldman Sachs (1992-94) and Deutsche Bank (1994-96). He is author of Devaluing to Prosperity: Misaligned Currencies and Their Growth Consequences (2012).

SKU	Unavailable
ISBN 13	9780881326239
ISBN 10	0881326232
Title	Devaluing to Prosperity – Misaligned Currencies and Their Growth Consequences
Author	Surjit Bhalla
Condition	Unavailable
Binding Type	Paperback
Publisher	The Peterson Institute for International Economics
Year published	2011-10-15
Number of pages	264
Cover note	Book picture is for illustrative purposes only, actual binding, cover or edition may vary.