Currency Crises and Output Dynamics
Open Economies Review, February 2015, Volume 26, Issue 1, pp. 139-153
Posted: 25 Feb 2015 Last revised: 27 Feb 2015
Date Written: February 24, 2015
Output effects of currency crises are often estimated to be negative and persistent. A new banking crisis database allows us to construct pure currency collapses that are not associated with banking crises. The estimates show that countries facing a pure currency crisis have fully recovery of output in the long-run while twin crisis leads to larger output losses. Allowing for long lags is a critical element in understanding the recovery dynamics. Further analysis reveals that there is a similar lag in the association between export growth and recovery dynamics.
Keywords: Devaluation, Currency crisis, Banking crisis, Exchange rate, Recovery
JEL Classification: E32, F32, F41, F43
Suggested Citation: Suggested Citation