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Assessing the Effect of Current Account and Currency Crises on Economic Growth

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  • Aßmann, Christian

Abstract

Several 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 coe?cients. 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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File URL: https://www.econstor.eu/bitstream/10419/22049/1/EWP-2008-01.pdf
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Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2008,01.

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Date of creation: 2008
Handle: RePEc:zbw:cauewp:6878
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Keywords: Currency crises; Current account reversals; Treatment Model; Discrete dependent variable; Efficient Importance Sampling; Panel Data;

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Find related papers by JEL classification:
  • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
  • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
  • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
  • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
  • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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Cited by:

  1. Fatoke-Dato, Mafaïzath A., 2015. "Impact of an educational demand-and-supply policy on girls' education in West Africa: Heterogeneity in income, school environment and ethnicity," BERG Working Paper Series 101, Bamberg University, Bamberg Economic Research Group.
  2. Meyer, Dietmar & Shera, Adela, 2015. "Remittances' impact on the labor supply and on the deficit of current account," BERG Working Paper Series 97, Bamberg University, Bamberg Economic Research Group.
  3. Christian Aßmann & Jens Boysen-Hogrefe & Nils Jannsen, 2013. "Costs Of Housing Crises: International Evidence," Bulletin of Economic Research, Wiley Blackwell, vol. 65(4), pages 299-313, October.
  4. Schmitt, Noemi & Tuinstra, Jan & Westerhoff, Frank, 2017. "Side effects of nonlinear profit taxes in an evolutionary market entry model: Abrupt changes, coexisting attractors and hysteresis problems," Journal of Economic Behavior & Organization, Elsevier, vol. 135(C), pages 15-38.
  5. Schmitt, Noemi & Westerhoff, Frank, 2015. "Evolutionary competition and profit taxes: market stability versus tax burden," BERG Working Paper Series 104, Bamberg University, Bamberg Economic Research Group.
  6. Bexheti, Abdylmenaf & Mustafi, Besime, 2015. "Impact of public funding of education on economic growth in Macedonia," BERG Working Paper Series 98, Bamberg University, Bamberg Economic Research Group.
  7. Fatoke-Dato, Mafaïzath A., 2015. "Impact of income shock on children's schooling and labor in a West African country," BERG Working Paper Series 102, Bamberg University, Bamberg Economic Research Group.
  8. Seregi, János & Lelovics, Zsuzsanna & Balogh, László, 2012. "The social welfare function of forests in the light of the theory of public goods," BERG Working Paper Series 87, Bamberg University, Bamberg Economic Research Group.

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