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on Open MacroEconomics |
| By: | Caner, Mehmet; Koehler-Geib, Fritzi; Vincelette, Gallina Andronova |
| Abstract: | This paper analyzes the drivers and consequences of sudden stops of capital flows. It focuses on the impact of external vulnerability on the depth and length of sudden stop crises. The authors analyze 43 developing and developed countries between 1993 and 2006. They find evidence that external vulnerability not only significantly impacts the probability of a sudden stop crisis, but also prolongs the time it takes for growth to revert to its long-term trend once a sudden stop occurs. Interestingly, external vulnerability does not significantly impact the size of the instantaneous output effect in case of a sudden stop but prompts a cumulative output effect through significantly diminishing the speed of adjustment of output to its trend. This finding implies that countries financing a large part of their absorption externally do not suffer more ferocious output losses in a sudden stop crisis, but take longer to adapt afterward and are hence expected to suffer more protracted crises periods. Compared with previous literature, this paper makes three contributions: (i) it extends the country and time coverage relative to datasets that have previously been used to analyze related topics; (ii) it specifically accounts for time-series autocorrelation; and (iii) it provides an analysis of the adjustment path of economic growth after a sudden stop. |
| Keywords: | Currencies and Exchange Rates,Debt Markets,Achieving Shared Growth,Emerging Markets,Economic Theory&Research |
| Date: | 2009–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5021&r=opm |
| By: | Petreski, Marjan |
| Abstract: | The aim of this paper is to examine the theoretical and empirical arguments for the relationship between the exchange-rate regime and economic growth. As a nominal variable, the exchange rate (regime) might not affect the long-run economic growth. However, there is no unambiguous theoretical evidence what impacts the exchange-rate target exhibits on growth. The channel through which the regime might influence growth is trade, investment and productivity. Theoretical considerations relate the exchange-rate effect on growth to the level of uncertainty imposed by flexible option of the rate. However, while reduced policy uncertainty under a peg promotes an environment which is conductive to production factor growth, trade and hence to output, such targets do not provide an adjustment mechanism in times of shocks, thus stimulating protectionist behaviour, price distortion signals and therefore misallocation of resources in the economy. Consequently, the relationship remains blurred and requires in-depth empirical investigation. The empirical research offers divergent result though. A big part of the studies focuses on the parameter of the exchange-rate dummy, but does not appropriately control for other country-characteristics nor apply appropriate growth framework. Also, the issue of endogeneity is not treated at all or inappropriate instruments are repeatedly used. Very few studies disgracedly pay small attention to the capital controls, an issue closely related to the exchange-rate regime and only one study puts the issue in the context of monetary regimes. Overall, the empirical evidence is condemned because of growth-framework, endogeneity, sample-selection bias and the so-called peso problem. An empirical investigation which will consider all those aspects might reveal clear and robust suggestion of the relationship between exchange-rate regime and growth. |
| Keywords: | Exchange rate regime,economic grow |
| JEL: | E42 F31 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:200931&r=opm |
| By: | Lendjoungou, Francis |
| Abstract: | This paper focuses on real exchange rate in the case of CEMAC countries. To analyze the situation in Cameroon, Central African Republic, Congo, Gabon and Chad we used annual data from 1979 to 2008. Two approaches were used related to equilibrium real exchange rate model based on fundamentals and calculations show that terms of trade, public expenditure, the degree of openness of the economy and productivity are the most important variables which influence the equilibrium of real exchange rate. Based on the estimated paths, there was a clear pattern of overvaluation before 1994, suggesting that the exchange rate adjustment was needed. Despite a relative appreciation trend during last years, the real exchange rate of CEMAC countries has not experienced an important overvaluation. |
| Keywords: | Equilibrium real exchange rate; CEMAC; FEER |
| JEL: | C53 O55 F41 C22 F31 |
| Date: | 2009–09–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:17053&r=opm |