Current account reversals in industrial countries: does the exchange rate regime matter?
This paper studies current account reversals in industrial countries across different exchange rate regimes. There are two major findings which have important implications for industrial economies with external imbalances: first, triggers of current account reversals differ between exchange rate regimes. While the current account deficit and the output gap are significant predictors of reversals across all regimes, reserve coverage, credit booms, openness to trade and the US short term interest rate determine the likelihood of reversals only under more rigid regimes. Conversely, the real exchange rate affects the probability of experiencing a reversal only under flexible arrangements. Second, current account reversals in advanced economies do not have an independent effect on growth. This result holds not only for industrial economies in general but also for countries with fixed exchange rate regimes in particular. JEL Classification: F32, F41
|Date of creation:||May 2013|
|Date of revision:|
|Contact details of provider:|| Postal: 60640 Frankfurt am Main, Germany|
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Leo de Haan & Hubert Schokker & Anastassia Tcherneva, 2008.
"What Do Current Account Reversals in OECD Countries Tell Us About the US Case?,"
The World Economy,
Wiley Blackwell, vol. 31(2), pages 286-311, 02.
- Leo de Haan & Hubert Schokker & Anastassia Tcherneva, 2006. "What do current account reversals in OECD countries tell us about the US case?," DNB Working Papers 111, Netherlands Central Bank, Research Department.
- Maurice Obstfeld, 2012.
"Does the Current Account Still Matter?,"
American Economic Review,
American Economic Association, vol. 102(3), pages 1-23, May.
- Martin Feldstein, 2008.
"Resolving the Global Imbalance: The Dollar and the U.S. Saving Rate,"
Journal of Economic Perspectives,
American Economic Association, vol. 22(3), pages 113-25, Summer.
- Martin S. Feldstein, 2008. "Resolving the Global Imbalance: The Dollar and the U.S. Saving Rate," NBER Working Papers 13952, National Bureau of Economic Research, Inc.
- Serven, Luis & Nguyen, Ha, 2010. "Global imbalances before and after the global crisis," Policy Research Working Paper Series 5354, The World Bank.
- Feldstein, Martin, 2008. "Resolving the Global Imbalance: The Dollar and the U.S. Saving Rate," Scholarly Articles 2792081, Harvard University Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20131547. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications)
If references are entirely missing, you can add them using this form.