Do We Really Know That Flexible Exchange Rates Facilitate Current Account Adjustment? Some New Empirical Evidence for CEE Countries

Sabine Herrmann

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2009, vol. 55, issue 4, 295-312

Abstract: This paper examines the relationship between the exchange rate regime and the pace of current account adjustment. The panel data set we refer to includes 11 catching-up countries from Central and Eastern Europe between 1994 and 2007. The exchange rate regime is measured by a continuous z-score measure of exchange rate volatility proposed by Gosh, Gulde, and Wolf (2003). Based on a basic autoregression estimation, the results indicate that a more flexible exchange rate regime significantly enhances the rate of current account adjustment.

Keywords: exchange rate regime; exchange rate volatility; current account imbalances; current account adjustment; Central and Eastern Europe (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Date: 2009
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