Assessing the effect of current account and currency crises on economic growth
AbstractSeveral empirical studies are concerned with measuring the effect of currency and current account crises on economic growth. Using different empirical models this paper serves two aspects. It provides an explicit assessment of country specific factors influencing the costs of crises in terms of economic growth and controls via a treatment type model for possible sample selection governing the occurrence of crises in order to estimate the impact on economic growth correctly. The applied empirical models allow for rich intertemporal dependencies via serially correlated errors and capture latent country specific heterogeneity via random coefficients. For accurate estimation of the treatment type model a simulated maximum likelihood approach employing efficient importance sampling is used. The results reveal significant costs in terms of economic growth for both crises. Costs for reversals are linked to country specific variables, while costs for currency crises are not. Furthermore, shocks explaining current account reversals and growth show strong significant positive correlation. --
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Bibliographic InfoPaper provided by Bamberg University, Bamberg Economic Research Group in its series BERG Working Paper Series with number 80.
Date of creation: 2011
Date of revision:
Currency crises; Current account reversals; Treatment Model; Discrete dependent variable; Efficient Importance Sampling; Panel Data;
Find related papers by JEL classification:
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-24 (All new papers)
- NEP-FDG-2011-05-24 (Financial Development & Growth)
- NEP-IFN-2011-05-24 (International Finance)
- NEP-OPM-2011-05-24 (Open Economy Macroeconomic)
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