Dear Colleague,

We cordially invite you to the wiiw seminar 'Policy Perspectives for European Integration' on

Thursday, 26 January, 2017, 4:00 pm
wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (entrance from the ground floor)

Revisiting the ‘Kaldor-paradox’: the real exchange rate, export performance and economic growth in the European Union

Gábor Oblath
Institute of Economics, Centre for Economic and Regional Studies of the Hungarian Academy of Sciences

Abstract
The presentation addresses the contemporary relevance of Nicolas Kaldors’s (1908‑1986) empirical propositions and policy recommendations regarding the real exchange rate (RER). The proposition concerning the relationship between changes in RERs and market shares is known as the ‘Kaldor paradox’ (KP). In a narrow sense the KP involves that real exchange rate (RER) changes either ‘do not work’, or have ‘perverse’ effects (i.e., depreciations are associated with decreasing market shares, and vice versa). Our empirical results, relying on alternative RER-indicators, and on the analysis of trade data of the EU member states between 1995 and 2015, contradict this assertion. They do, however give support to a broader interpretation of the KP, involving the relevance of non-price/cost competitiveness. This leads us to revisit Kaldor’s policy proposal regarding the importance of maintaining a ‘competitive’ RER level to promote economic growth. Our estimates for the EU-countries suggest that overvalued RERs involve non-linear negative growth-effects, but the relationship is asymmetric. Undervalued RERs are associated with milder positive effects on growth, and the returns to increasing undervaluation are diminishing.

(Papers and presentation slides, as far as available, are posted on our homepage http://wiiw.ac.at/events.html after the respective seminars.)

Best regards,

Univ. Prof. Dr. Michael Landesmann                                                  Dr. Sándor Richter
Former Scientific Director wiiw                                                                    Organizer

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Michaela Bönisch

Wiener Institut für Internationale Wirtschaftsvergleiche (wiiw)
The Vienna Institute for International Economic Studies
Rahlgasse 3, A-1060 Wien

T: +43 1 533 66 10 - 40
F: +43 1 533 66 10 - 50
boenisch@wiiw.ac.at
http://www.wiiw.ac.at/

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