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Current-account adjustments and exchange-rate misalignments

Blaise Gnimassoun () and Valérie Mignon ()
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Blaise Gnimassoun: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper aims at studying current-account imbalances by paying a particular attention to exchange-rate misalignments. We rely on a nonlinear model linking the persistence of current-account imbalances to the deviation of the exchange rate to its equilibrium value. Estimating a panel smooth transition regression model on a sample of 22 industrialized countries, we show that persistence of current-account imbalances strongly depends on currency misalignments. More specifically, while there is no persistence in cases of currency undervaluation or weak overvaluation, persistence tends to augment for overvaluations higher than 11%. In addition, whereas disequilibria are persistent even for very low overvaluations in the euro area, persistence is observed only for overvaluations higher than 14% for non-eurozone members.

Keywords: current-account imbalances; current-account persistence; exchange-rate misalignments; panel smooth transition regression models (search for similar items in EconPapers)
Date: 2013
Note: View the original document on HAL open archive server: https://hal.science/hal-04141182
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Citations: View citations in EconPapers (1)

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Working Paper: Current-Account Adjustments and Exchange-Rate Misalignments (2013) Downloads
Working Paper: Current-account adjustments and exchange-rate misalignments (2013) Downloads
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