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An Assessment of the Disorderly Adjustment Hypothesis for Industrial Economies

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  • Hilary Croke
  • Steven B. Kamin
  • Sylvain Leduc

Abstract

Much has been written about prospects for US current account adjustment, including the possibility of what is sometimes referred to as a 'disorderly correction': a sharp fall in the exchange rate that boosts interest rates, depresses stock prices and weakens economic activity. This paper assesses some of the empirical evidence bearing on the plausibility of the disorderly adjustment scenario, drawing on the experience of previous current account adjustments in industrial economies. We examined the paths of key economic performance indicators before, during and after the onset of adjustment, building on the analysis of Freund (2000). Copyright 2006 Blackwell Publishing Ltd.

Suggested Citation

  • Hilary Croke & Steven B. Kamin & Sylvain Leduc, 2006. "An Assessment of the Disorderly Adjustment Hypothesis for Industrial Economies," International Finance, Wiley Blackwell, vol. 9(1), pages 37-61, May.
  • Handle: RePEc:bla:intfin:v:9:y:2006:i:1:p:37-61
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    Cited by:

    1. Chen Fang & Cheng-te Lee, 2014. "Coexistence of Sustained External Imbalance and Real Exchange Rate Misalignment: The Underlying Fundamentals," Economics Bulletin, AccessEcon, vol. 34(3), pages 1714-1722.
    2. Carol C. Bertaut & Steven B. Kamin & Charles P. Thomas, 2008. "How long can the unsustainable U.S. current account deficit be sustained?," International Finance Discussion Papers 935, Board of Governors of the Federal Reserve System (U.S.).
    3. Michael Bordo & Robert N McCauley, 2017. "Triffin: dilemma or myth?," BIS Working Papers 684, Bank for International Settlements.
    4. Steven B. Kamin & Trevor A. Reeve & Nathan Sheets, 2009. "U.S. External Adjustment: Is It Disorderly? Is It Unique? Will It Disrupt The Rest Of The World?," Contemporary Economic Policy, Western Economic Association International, vol. 27(2), pages 265-292, April.
    5. Gian M Milesi-Ferretti, 2008. "Fundamentals at Odds? The U.S. Current Account Deficit and The Dollar," IMF Working Papers 08/260, International Monetary Fund.
    6. William D. Craighead & David R. Hineline, 2013. "As the Current Account Turns: Disaggregating the Effects of Current Account Reversals in Industrial Countries," The World Economy, Wiley Blackwell, vol. 36(12), pages 1516-1541, December.

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