Exchange rate policy and export performance in a landlocked developing country: The case of Nepal |
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Affiliation: | 1. Department of Economics, Santa Clara University, CA, United States;2. CAGE, United Kingdom;3. CEPR, United Kingdom;4. NBER, United States;5. Department of Economics, Occidental college |
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Abstract: | This paper examines the implications of Nepal's exchange rate policy for its export performance over the period 1980–2010. We first document Nepal's long-standing currency peg against the Indian rupee and that Nepal's real exchange rate appreciated substantially from the late 1990s. We then employ a gravity modeling approach to confirm that this real exchange rate appreciation has adversely affected Nepal's exports, especially to third-country markets. Nepal's exchange rate-related export competitiveness trap provides a motivation to reconsider the current peg. |
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Keywords: | Export performance Real exchange rate Gravity model Nepal Landlocked F13 F14 O50 |
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