Current Account Adjustment in Developing Countries: The Role of Exchange Rate Regimes

Xiaoyi Mu, Haichun Ye

    Research output: Contribution to journalArticle

    4 Citations (Scopus)

    Abstract

    This article employs hazard models to investigate the role of exchange rate regimes in the timing of current account adjustment in developing countries. We identify high current account deficit spells and find that fixed exchange rate regimes increase the duration of high deficit spells and thus delay current account adjustment. The result is robust to a variety of model specifications and alternative classifications of exchange rate regimes. When distinguishing between hard pegs and soft pegs, we notice that the delay in the current account adjustment is primarily driven by hard pegs rather than soft pegs.
    Original languageEnglish
    Pages (from-to)1566-1581
    Number of pages16
    JournalEconomic Inquiry
    Volume51
    Issue number2
    Early online date7 Dec 2012
    DOIs
    Publication statusPublished - Apr 2013

    Keywords

    • : exchange rate regimes, current account adjustment, duration models, hazard

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