Pick Your Poison: The Exchange Rate Regime and Capital Account Volatility in Emerging Markets

Shigeru Iwata and Evan Tanner ()

No 2003/092, IMF Working Papers from International Monetary Fund

Abstract: We characterize a country's exchange rate regime by how its central bank channels a capital account shock across three variables: exchange depreciation, interest rates, and international reserve flows. Structural vector autoregression estimates for Brazil, Mexico, and Turkey reveal such responses, both contemporaneously and over time. Capital account shocks are further shown to affect output growth and inflation. The nature and magnitude of these effects may depend on the exchange rate regime.

Keywords: WP; exchange rate; exchange rate regime; capital account; structural vector autoregression; band era; interest rate hike; exchange rate crisis; exchange rate pass-through effect; capital market shock; exchange rate movement; Reponses eN; interest rate change; country's exchange rate regime; exchange rate shock; exchange rate pass-through channel; exchange rate regime assumption; Exchange rate arrangements; Exchange rates; Exchange rate flexibility; Inflation; Global (search for similar items in EconPapers)
Pages: 28
Date: 2003-05-01
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Citations: View citations in EconPapers (8)

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Journal Article: Pick Your Poison: The Exchange Rate Regime and Capital Account Volatility in Emerging Markets (2007)
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