{"title":"UNDERVALUATION AND NEW BUSINESS FORMATION IN DEVELOPING COUNTRIES","authors":"B. Mazorodze","doi":"10.1142/s1084946723500115","DOIUrl":null,"url":null,"abstract":"The widespread recognition of new business formation as a facilitator of economic development has generated interest in examining its relevant determinants. In this paper, a rudimentary framework is proposed and empirically tested in which undervaluation of the real exchange rate incentivizes the establishment of new businesses. The goal of the paper is to establish the effect of real exchange rate undervaluation on the formation of new businesses. Using a broad sample of 40 developing countries observed between 2010 and 2018, results from a fixed effects Poisson model finds the evidence supportive of our hypothesis. The results particularly confirm a positive and sizeable effect of real exchange rate undervaluation on the number of newly registered businesses. Additionally, we find this positive effect stronger in countries with reliable energy, human capital, access to finance and efficient transport systems. These findings suggest that exchange rate policies that maintain undervalued exchange rates have an important bearing on business start-ups in developing countries and more so when accompanied by policy efforts to improve human capital, access to finance, efficient transport systems and the supply of reliable energy.","PeriodicalId":46653,"journal":{"name":"Journal of Developmental Entrepreneurship","volume":null,"pages":null},"PeriodicalIF":1.3000,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Developmental Entrepreneurship","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1142/s1084946723500115","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS","Score":null,"Total":0}
引用次数: 0
Abstract
The widespread recognition of new business formation as a facilitator of economic development has generated interest in examining its relevant determinants. In this paper, a rudimentary framework is proposed and empirically tested in which undervaluation of the real exchange rate incentivizes the establishment of new businesses. The goal of the paper is to establish the effect of real exchange rate undervaluation on the formation of new businesses. Using a broad sample of 40 developing countries observed between 2010 and 2018, results from a fixed effects Poisson model finds the evidence supportive of our hypothesis. The results particularly confirm a positive and sizeable effect of real exchange rate undervaluation on the number of newly registered businesses. Additionally, we find this positive effect stronger in countries with reliable energy, human capital, access to finance and efficient transport systems. These findings suggest that exchange rate policies that maintain undervalued exchange rates have an important bearing on business start-ups in developing countries and more so when accompanied by policy efforts to improve human capital, access to finance, efficient transport systems and the supply of reliable energy.
期刊介绍:
The Journal of Developmental Entrepreneurship (JDE) provides a forum for the dissemination of descriptive, empirical, and theoretical research that focuses on issues concerning microenterprise and small business development, especially under conditions of adversity. The intended audiences for JDE are scholars who study issues of developmental entrepreneurship and professionals involved in governmental and non-governmental efforts to facilitate entrepreneurship in economic and community development programs around the world. Articles will cover a broad range of topics, including: -Entrepreneurship and self-employment in developing contexts -Challenges and opportunities unique to minority and women entrepreneurs -Microenterprise funds and private-sector small business lending practices -Legislation, regulation, and tax policy that impact entrepreneurship and economic development -Processes that facilitate growth and development within emerging enterprises -Networks within and among entrepreneurial ventures -Marketing patterns and approaches in venture growth and development -International developmental entrepreneurship programs -Entrepreneurship in the informal economic sector -Education and training for aspiring entrepreneurs -Industry practices that adversely affect microenterprise development -Economic and social impacts of microenterprise activity