An Assessment of the Disorderly Adjustment Hypothesis for Industrial Economies*

Hilary Croke, Steven B. Kamin and Sylvain Leduc ()

International Finance, 2006, vol. 9, issue 1, pages 37-61

Abstract: Much has been written about prospects for US current account adjustment, including the possibility of what is sometimes referred to as a 'disorderly correction': a sharp fall in the exchange rate that boosts interest rates, depresses stock prices and weakens economic activity. This paper assesses some of the empirical evidence bearing on the plausibility of the disorderly adjustment scenario, drawing on the experience of previous current account adjustments in industrial economies. We examined the paths of key economic performance indicators before, during and after the onset of adjustment, building on the analysis of Freund (2000). Copyright 2006 Blackwell Publishing Ltd.

Date: 2006
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