Exchange Rate Regimes and the International Transmission of Business Cycles: Capital Account Openness Matters

43 Pages Posted: 16 Jun 2018

See all articles by Kyunghun Kim

Kyunghun Kim

Korea Institute for International Economic Policy

Ju Hyun Pyun

Korea University Business School (KUBS)

Date Written: May 27, 2018

Abstract

We investigate the role of exchange rate regimes in the international transmission of business cycles during the global financial crisis. We find that exchange rate regimes alone did not account for differences in the international transmission of business cycles during the crisis. However, analysis considering capital account openness and countries with currencies pegged to the U.S. dollar indicates that exchange rate regimes play an important role in shaping business cycle co-movement: adopting a fixed regime with high capital account openness (additionally) increased business cycle co-movement with the United States during the crisis, whereas U.S. dollar peggers with relatively restrictive capital accounts during the crisis were not found to affect business cycle transmission.

Keywords: Exchange Rate Regime, Business Cycle Co-Movement, Capital Account Openness, Global Financial Crisis, Trilemma

JEL Classification: E32, E52, F31, F33, F44

Suggested Citation

KIim, Kyunghun and Pyun, Ju Hyun, Exchange Rate Regimes and the International Transmission of Business Cycles: Capital Account Openness Matters (May 27, 2018). Available at SSRN: https://ssrn.com/abstract=3185831 or http://dx.doi.org/10.2139/ssrn.3185831

Kyunghun KIim

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Ju Hyun Pyun (Contact Author)

Korea University Business School (KUBS) ( email )

145 Anam-Ro, Seongbuk-Gu
Seoul, 02841
Korea, Republic of (South Korea)
82-2-3290-2610 (Phone)

HOME PAGE: http://sites.google.com/site/juhyunpyun/research

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