Bussirère, Matthieu and Lopez, Claude and Tille, Cédric (2013): Currency Crises in Reverse: Do Large Real Exchange Rate Appreciations Matter for Growth? Abstracts: This study providing an empirical exploration of historical episodes of large real exchange rate appreciations and impacts on output, using a sample of 28 advanced and 25 emerging market economies, with annual data going back to 1970. - First finding is that countries experiencing large real exchange rate appreciations display distinct patterns: large appreciations significantly lower export growth and boost import growth on impact. Strikingly, however, output growth is higher, on average, despite the adverse impact on exports. - Second finding is that these aggregate numbers hide substantial heterogeneity, which we link to the nature of the shocks that cause the appreciation. In particular, appreciations associated with so-called “capital flow bonanzas” have a marked downward effect on growth. This pattern is consistent with the insights from a simple model that contrasts the impact of productivity shocks with that of capital inflows shocks. Higher productivity in the traded sector leads to a boom in traded output and a current account surplus, while higher foreign lending leads to a boom in non-traded output and an external deficit as traded output falls and consumption increases. mpra.ub.uni-muenchen.de/44053/
Posted on: Thu, 15 Aug 2013 16:52:02 +0000
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