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Crisis and recovery: Role of the exchange rate regime in emerging market economies

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  • Tsangarides, Charalambos G.

Abstract

Following the recent global financial crisis, questions about the mechanisms that can help countries cope with large shocks have resurfaced. This paper examines the role of the exchange rate regime in explaining how emerging market economies fared in the recent global financial crisis, particularly in terms of output losses and output rebound. After controlling for regime switches during the crisis, using alternative definitions for pegs, and taking account of other likely determinants, we find that the growth performance for pegs was not different from that of floats during the crisis. The picture is different for the recovery period 2010–2011, as pegs appear to be faring worse, with growth recovering more slowly than floats. These results suggest an asymmetric effect of the regime during and recovering from the crisis. We also find that proxies of the trade and financial channels are important determinants of growth performance during the crisis, while only the trade channel appears important for the recovery thus far.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 34 (2012)
Issue (Month): 2 ()
Pages: 470-488

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Handle: RePEc:eee:jmacro:v:34:y:2012:i:2:p:470-488

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Web page: http://www.elsevier.com/locate/inca/622617

Related research

Keywords: Global financial crisis; Fixed exchange rate; Growth; Emerging market economies;

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References

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Citations

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Cited by:
  1. Aleksandra Iwulska & Naotaka Sugawara & Juan Zalduendo, 2012. "Financial Integration in Emerging Europe: an Enviable Development Opportunity with Tail Risks," CASE Network Studies and Analyses 438, CASE-Center for Social and Economic Research.
  2. Abdul Rashid & Mashael Bin Saedan, 2014. "Financial crisis and exchange rates in emerging economies: An empirical analysis using PPP-UIP-Framework," Business and Economic Horizons (BEH), Prague Development Center, vol. 9(4), pages 86-96, January.
  3. Alfred Sitz & Aneliya Adzhemova & Atanas Pekanov, 2013. "Bulgarien: wirtschaftspolitische Strategie und ökonomische Entwicklung seit der Öffnung," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 39(1), pages 69-86.
  4. Josifidis, Kosta & Allegret, Jean-Pierre & Gimet, Céline & Pucar, Emilija Beker, 2014. "Macroeconomic policy responses to financial crises in emerging European economies," Economic Modelling, Elsevier, vol. 36(C), pages 577-591.

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