Current Account Reversals and Currency Crises: Empirical Regularities

Gian Maria Milesi-Ferretti (gmilesiferretti@brookings.edu) and Assaf Razin

No 1921, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies sharp reductions in current account deficits and large exchange rate depreciations in low- and middle-income countries. It examines which factors help predict the occurrence of a reversal or a currency crisis, and how these events affect macroeconomic performance. It finds that both domestic factors, such as the low reserves, and external factors, such as unfavourable terms of trade and high interest rates in industrial countries, trigger reversals and currency crises. The two types of events are, however, distinct; indeed, current account imbalances are not sharply reduced in the years following a currency crisis. Economic performance around these events is also quite different. An exchange rate crash is associated with a fall in output growth and a recovery thereafter, while for reversal events there is no systematic evidence of a growth slowdown.

Keywords: Currency Crisis; current account reversal; Growth; Openness; Real Exchange Rate (search for similar items in EconPapers)
JEL-codes: F31 F32 F33 F34 (search for similar items in EconPapers)
Date: 1998-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (184)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1921 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Chapter: Current Account Reversals and Currency Crises: Empirical Regularities (2000)
Working Paper: Current Account Reversals and Currency Crises: Empirical Regularities (1998)
Working Paper: Current Account Reversals and Currency Crises: Empirical Regularities (1998)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:1921

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=1921
orders@cepr.org

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by (repec@cepr.org).