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Aftermaths of Current Account Crisis: Export Growth or Import Contraction?

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  • Federico Sturzenegger
  • Pablo Guidotti
  • Agustín Villar

Abstract

This paper defines current account crises as current account adjustments that occur in the aftermath of a sizable reduction in capital flows. We study the characteristics of such current account adjustments, particularly whether they are executed through export growth or import contraction. We find significant differences between Asia and Latin America, with Asian countries adjusting through export growth and Latin America through import contraction. When looking at the fundamentals that explain such dissimilar behavior, we conclude that these differences are attributable to differences in the degree of openness and financial dollarization with the size of the financial sector being irrelevant. We argue that the analysis allows the conclusion that “pesified” financial sectors that insulate the domestic financial sector from exchange rate movements are better suited to deal with unstable international financial markets.

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File URL: http://www.utdt.edu/departamentos/empresarial/cif/pdfs-wp/wpcif-062003.pdf
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Bibliographic Info

Paper provided by Universidad Torcuato Di Tella in its series Business School Working Papers with number once.

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Length: 27 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:udt:wpbsdt:once

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References

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  1. Chinn, Menzie D. & Prasad, Eswar S., 2003. "Medium-term determinants of current accounts in industrial and developing countries: an empirical exploration," Journal of International Economics, Elsevier, vol. 59(1), pages 47-76, January.
  2. Guillermo A. Calvo, 2001. "Capital markets and the exchange rate with special reference to the dollarization debate in Latin America," Proceedings, Federal Reserve Bank of Cleveland, pages 312-338.
  3. Guillermo A. Calvo & Carlos A. Vegh, 1999. "Inflation Stabilization and BOP Crises in Developing Countries," NBER Working Papers 6925, National Bureau of Economic Research, Inc.
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Cited by:
  1. Bernardina Algieri & Thierry Bracke, 2007. "Patterns of Current Account Adjustment – Insights from Past Experience," CESifo Working Paper Series 2029, CESifo Group Munich.
  2. Algieri, Bernardina & Bracke, Thierry, 2007. "Patterns of current account adjustment: insights from past experience," Working Paper Series 0762, European Central Bank.

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