Exchange-market pressure and currency crises in Latin America: Empirical tests of their macroeconomic determinants

Scott Hegerty

Economics Bulletin, 2010, vol. 30, issue 3, 2210-2219

Abstract: During the financial crisis of 2008, the currencies of Latin America faced pressure to devalue— which evoked memories of the “contagious” crises of the 1990s. Yet even between crises, domestic macroeconomic factors can have an impact on a country's exchange market. This study creates quarterly time series of exchange-market pressure for five Latin American countries, not only for two periods of crisis, but for the entire past decade. These series are then used in two separate analyses. The first addresses the macroeconomic determinants of this pressure, finding that current account deficits place the most pressure on a country's currency and that economic growth tends to reduce this pressure. The second study assesses the probability of a crisis, and finds that oil price drops (a global factor) might precipitate a currency crisis.

Keywords: Exchange Market Pressure; Currency Crises; Current Account; Latin America (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Date: 2010-08-26
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Citations: View citations in EconPapers (3)

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