Persistence of Output Fluctuations Under Different Exchange Rate Regimes

Mark Crosby and Glenn Otto

Asian Economic Journal, 2003, vol. 17, issue 3, 281-296

Abstract: In a recent paper, Giugale and Korobow (2000) present evidence that suggests that the time required by output to return to trend following a financial shock is faster under a flexible exchange rate regime than under a fixed exchange rate. In this paper, we use vector autoregression models to measure the persistence properties of output for a number of countries in the Asia–Pacific region. Our results suggest that output persistence is not uniquely related to a country's choice of exchange rate regime. The two countries in our sample with the least persistent output following a financial shock are Australia, where the exchange rate is fully flexible, and Hong Kong, where it is rigidly fixed via a currency board.

Date: 2003
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https://doi.org/10.1111/j.1467-8381.2003.00187.x

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