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Output Costs of Currency Crises: Shocks, Policies and Cycles

Ryota Nakatani

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies output declines during currency crises based on the theoretical model by Nakatani (2016, 2017a), highlighting the role of shocks that trigger crises. Using panel data on 49 developing countries, we find that both productivity shocks in the real sector and shocks to the country’s risk premium in financial markets affect the output costs of currency crises, which are 4% of GDP on average and 8% for severe crises. During severe currency crises in Asian and Latin-American countries, both productivity shocks and exchange rate overvaluation were found to be important factors in explaining large output losses.

Keywords: Growth; Currency Crisis; Productivity; Risk Premium; Exchange Rate Overvaluation; Developing Countries (search for similar items in EconPapers)
JEL-codes: E32 F41 F43 G15 O47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac, nep-mon, nep-opm and nep-sea
Date: 2018-01-01
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Related works:
Journal Article: Output Costs of Currency Crisis and Banking Crisis: Shocks, Policies and Cycles (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:83549

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