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Do we really know that flexible exchange rates facilitate current account adjustment? Some new empirical evidence for CEE countries

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  • Herrmann, Sabine

Abstract

This paper examines the relationship between the exchange rate regime and the pace of current account adjustment. The panel data set we refer to includes 11 catching-up countries from central, eastern and south-eastern Europe between 1994 and 2007. The exchange rate regime is measured by a continuous z-score measure of exchange rate volatility proposed by Gosh, Gulde and Wolf (2003). Based on a basic autoregression estimation, the results indicate that a more flexible exchange rate regime significantly enhances the rate of current account adjustment. --

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2009,22.

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Date of creation: 2009
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Handle: RePEc:zbw:bubdp1:200922

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Keywords: Current account adjustment; exchange rate regime; Central and Eastern Europe;

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  1. Mussa, Michael, 1986. "Nominal exchange rate regimes and the behavior of real exchange rates: Evidence and implications," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 117-214, January.
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  6. Herrmann, Sabine & Winkler, Adalbert, 2009. "Real convergence, financial markets, and the current account - Emerging Europe versus emerging Asia," The North American Journal of Economics and Finance, Elsevier, vol. 20(2), pages 100-123, August.
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  10. George Tavlas & Harris Dellas & Alan Stockman, 2008. "The Classification and Perfomance of Alternative Exchange-Rate Systems," Working Papers 90, Bank of Greece.
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  12. Herrmann, Sabine & Jochem, Axel, 2005. "Determinants of current account developments in the central and east European EU member states - consequences for the enlargement of the euro area," Discussion Paper Series 1: Economic Studies 2005,32, Deutsche Bundesbank, Research Centre.
  13. Jesmin Rahman, 2008. "Current Account Developments in New Member States of the European Union," IMF Working Papers 08/92, International Monetary Fund.
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  17. Jörg Decressin & Emil Stavrev, 2009. "Current Accounts in a Currency Union," IMF Working Papers 09/127, International Monetary Fund.
  18. Kraay, Aart & Ventura, Jaume, 1997. "Current accounts in debtor and creditor countries," Policy Research Working Paper Series 1825, The World Bank.
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Cited by:
  1. Ghosh, Atish R. & Qureshi, Mahvash S. & Tsangarides, Charalambos G., 2013. "Is the exchange rate regime really irrelevant for external adjustment?," Economics Letters, Elsevier, vol. 118(1), pages 104-109.
  2. Issiaka Coulibaly & Blaise Gnimassoun, 2013. "Current account sustainability in Sub-Saharan Africa: Does the exchange rate regime matter?," EconomiX Working Papers 2013-42, University of Paris West - Nanterre la Défense, EconomiX.
  3. Arratibel, Olga & Furceri, Davide & Martin, Reiner & Zdzienicka, Aleksandra, 2011. "The effect of nominal exchange rate volatility on real macroeconomic performance in the CEE countries," Economic Systems, Elsevier, vol. 35(2), pages 261-277, June.
  4. Herrmann, Sabine & Jochem, Axel, 2013. "Current account adjustment in EU countries: Does euro-area membership make a difference?," Discussion Papers 49/2013, Deutsche Bundesbank, Research Centre.
  5. Atish R. Ghosh & Jonathan David Ostry & Mahvash Saeed Qureshi, 2014. "Exchange Rate Management and Crisis Susceptibility: A Reassessment," IMF Working Papers 14/11, International Monetary Fund.

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