Poverty and Real Exchange: Evidence from Panel Data

The paper explores the relationship between economic policies and poverty by using the dependant economy model framework. Accordingly, it focuses on two variables: the real exchange rate and the absorption, and explores the links between these two variables and poverty. This method has particularly the advantage of addressing model uncertainty. Using the System general method of moments (SY-GMM) estimator (Blundell and Bond, 1998), the paper shows that real exchange rate depreciation favours the poor, provided that income is fairly distributed and institutions are sound.