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Current Account Reversals and Currency Crises: Empirical Regularities

In: Currency Crises

  • Gian Maria Milesi Ferretti
  • Assaf Razin

This paper studies large reductions in current account deficits and exchange rate depreciations in low- and middle-income countries. It examines which factors help predict the occurrence of a reversal or a currency crisis, and how these events affect macroeconomic performance. Both domestic factors, such as the low reserves, and external factors, such as unfavorable terms of trade, are found to trigger reversals and currency crises. The two types of events are, however, distinct; an exchange rate crash is associated with a fall in output growth and a recovery thereafter, while for reversals there is no systematic evidence of a growth slowdown.

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This chapter was published in:
  • Paul Krugman, 2000. "Currency Crises," NBER Books, National Bureau of Economic Research, Inc, number krug00-1, Abril.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 8695.
    Handle: RePEc:nbr:nberch:8695
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
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