Non-linear Effect of Exchange Rate on Economic Growth in OECD Countries - - Panel data analysis based on PSTR model

Abstract

Based on the panel data of 35 OECD countries from 2001 to 2019, this paper empirically analyzes the nonlinear effect of exchange rate on economic growth of countries through PSTR model. The results show that exchange rate appreciation has a certain role in promoting economic growth. When the value of the local currency is high, the exchange rate appreciation has a stronger effect on promoting economic growth; when the value of the local currency is low, the exchange rate appreciation has a weaker effect on economic growth. Further research shows that when the local currency value is low, the development of export trade has a strong positive impact on economic growth, while the inflow of FDI has a weak effect on economic growth. When the currency value is low, the promotion effect of export trade on economic growth is relatively weak, while the inflow of FDI shows a stronger promoting effect on economic development, and the nonlinear effect of exchange rate on economic growth is positive. It is the comprehensive effect of these channels.