The Macroeconomic Effects of Large Exchange Rate Appreciations
AbstractIn this paper we study the macroeconomic effects of large exchange rate appreciations. In a sample of 128 countries since 1960, we identify 25 episodes of large nominal and real appreciations shocks and study their macroeconomic effects in a dummy-augmented panel autoregressive model. Our results show that an exchange rate appreciation can have strong effects on current account balances. Within three years after the appreciation event, the current account balance on average deteriorates by three percentage points of GDP. This effect occurs through a reduction of savings without a meaningful reduction in investment. Real export growth slows down substantially, while imports remain by and large unaffected. However, the output costs of appreciation are small and not statistically significant, indicating a shift towards domestic sources of growth. All these effects appear somewhat more pronounced in developing countries. Dans ce document de travail, nous étudions les effets macroéconomiques de larges appréciations du taux de change. Dans un échantillon de 128 pays depuis 1960, nous identifions 25 épisodes de larges appréciations nominales et réelles, et nous étudions leurs effets macroéconomiques dans un modèle autorégressif en données de panel augmenté d’une variable indicatrice. Nos résultats montrent qu’une appréciation du taux de change peut avoir des effets importants sur la balance courante. En moyenne, dans les trois ans suivant l’épisode d’appréciation, la balance courante se détériore en moyenne de trois points de PIB. Cet effet se produit via par une réduction de l’épargne, sans une réduction significative de l’investissement. La croissance réelle des exportations se ralentit sensiblement, alors que les importations restent dans l’ensemble inchangées. Toutefois, les pertes en termes de production résultant des appréciations sont faibles et non statistiquement significatifs, ce qui indique un déplacement vers des sources internes de croissance. Tous ces effets apparaissent quelque peu plus prononcés dans les pays en développement.
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Bibliographic InfoPaper provided by OECD Publishing in its series OECD Development Centre Working Papers with number 296.
Date of creation: Feb 2011
Date of revision:
current account adjustment; global imbalances; exchange rate changes; ajustement du compte courant; déséquilibres mondiaux; variations de taux de change;
Other versions of this item:
- Kappler, Marcus & Reisen, Helmut & Schularick, Moritz & Turkisch, Edouard, 2011. "The macroeconomic effects of large exchange rate appreciations," ZEW Discussion Papers 11-016, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Kappler, Marcus & Reisen, Helmut & Schularick, Moritz & Turkisch, Edouard, 2011. "The macroeconomic effects of large exchange rate appreciations," Discussion Papers 2011/3, Free University Berlin, School of Business & Economics.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-12 (All new papers)
- NEP-CBA-2011-03-12 (Central Banking)
- NEP-OPM-2011-03-12 (Open Economy Macroeconomic)
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