Output Recovery After Currency Crises

Sheida Teimouri and Taggert Brooks
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Sheida Teimouri: Department of Economics, College of Business Administration, University of Wisconsin-La Crosse, 1725 State Street, La Crosse, WI 54601, USA. E-mails: steimouri@uwlax.edu; tbrooks@uwlax.edu

Comparative Economic Studies, 2015, vol. 57, issue 1, 75-102

Abstract: This study examines the shape and dynamics of output recovery following currency crises characterized by currency crashes or large reserve losses. Our estimation allows output to follow U, V and L-shaped paths following each type of currency crises. The results indicate that output recovery after currency crises is, on average, V-shaped. In addition, currency crashes initially lead to a decline in output, but the output fully recovers to its non-crisis level within three years. Currency crises characterized by large reserve losses lead to a smaller initial output cost, but a larger decline in output in the long run.

Date: 2015
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