Currency Devaluation and Output Growth in Asia

According to the traditional theory, it is expected that depreciation in domestic currency generally decreases the relative price of domestically produced goods and thereby stimulates demand for domestic export. Hence, currency depreciation can be expected to have expansionary effects on real output in Asia. But there is now enough studies evidence that currency devaluation can lead to lower rates of economic growth. So this study use more rigorous empirical model and econometric methodology examines the effect of currency devaluation on output expansion in Asian countries. The empirical results finds it depreciation exerts a positive impact on output growth in Asian countries.