Page 521 - 2016 - Vol. 40

the economic growth, the effect of exchange rate volatility
conclude either on exchange rate neutrality, or on a
different effect in industrial and developing countries.
Some recent studies suggested that the failure of the
empirical literature at bringing a stable, clear-cut effect of
exchange volatility to the fore may be due to nonlinear
effects: Razin and Rubinstein (2006) allowed the exchange
rate regime to have both direct effect on short-term growth,
and an indirect one that is channeled through the crisis
probability, while A ghion et al. (2009) argued that the
choice of exchange rate regime should depend on financial
development. Using a sample of 83 countries spanning the
years (1960-2000), they showed that real exchange rate
volatility can have a significant impact on the long-term
rate of productivity growth, but the effect depends critically
on the countries' level of financial development.

Exploring the relation between economic activity
and government expenditure. The dynamics of different
categories of government expenditure are undoubtedly
explained by different determinants, we concentrate our
attention on a broad aggregate expenditure because of two
main reasons. First, the matters for the determination of
government deficit and debt, and ultimately for the overall

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