Does the Exchange Rate Regime Matter for Real Shocks? Evidence from Windstorms and Earthquakes

34 Pages Posted: 29 Jan 2009 Last revised: 14 Dec 2013

See all articles by Rodney Ramcharan

Rodney Ramcharan

University of Southern California, Marshall School of Business

Date Written: January 27, 2009

Abstract

Does the choice of exchange rate regime affect an economy's adjustment to real shocks? Exploiting the unpredictability and economic exogeniety of windstorms-hurricanes and typhoons-and earthquakes this paper assess the often contrasting answers found in the theoretical literature. There is robust evidence that exchange rate flexibility helps an economy better adjust to real shocks. And consistent with the channels emphasized in the classic literature on exchange rates and shocks, differences in the behavior of the export sector help explain the different reactions between the two regimes.

Keywords: Exchange Rates, Economic Adjustment, Shocks

JEL Classification: F31, F4

Suggested Citation

Ramcharan, Rodney, Does the Exchange Rate Regime Matter for Real Shocks? Evidence from Windstorms and Earthquakes (January 27, 2009). Journal of International Economics, Vol. 73, No. 1, 2007. Available at SSRN: https://ssrn.com/abstract=1333725

Rodney Ramcharan (Contact Author)

University of Southern California, Marshall School of Business ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

HOME PAGE: http://https://sites.google.com/site/rodneyramcharan/

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