Economic Integration and the Exchange Rate Regime: How Damaging are Currency Crises?

77 Pages Posted: 4 Feb 2004

See all articles by Günter W. Beck

Günter W. Beck

University of Siegen

Axel A. Weber

University of Cologne - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2003

Abstract

We use consumer price data for 205 cities/regions in 21 countries to study PPP deviations before, during and after the major currency crises of the 1990s. We combine data from industrialized nations in North America (Unites States, Canada and Mexico), Europe (Germany, Italy, Spain and Portugal), Asia (Japan and South Korea), and Oceania (Australia and New Zealand) with corresponding data from emerging market economies in South America (Argentina, Bolivia, Brazil, Columbia) and Asia (India, Indonesia, Malaysia, Philippines, Taiwan, Thailand). By doing so, we confirm previous results that both distance and border explain a significant amount of relative price variation across different locations. We also find that currency attacks had major disintegration effects by considerably increasing these border effects and by raising within-country relative price dispersion in emerging market economies. These effects are found to be quite persistent since relative price volatility across emerging markets today is still significantly larger than a decade ago.

Keywords: Relative price volatility, spatial data, real exchange rate volatility, law of one price, purchasing power parity, currency crisis, contagion, economic integration

JEL Classification: F40, F41

Suggested Citation

Beck, Günter W. and Weber, Axel A., Economic Integration and the Exchange Rate Regime: How Damaging are Currency Crises? (October 2003). Available at SSRN: https://ssrn.com/abstract=494043 or http://dx.doi.org/10.2139/ssrn.494043

Günter W. Beck (Contact Author)

University of Siegen ( email )

Unteres Schloss 3
Siegen, NRW 57072
Germany

Axel A. Weber

University of Cologne - Department of Economics ( email )

Cologne, 50923
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
80
Abstract Views
1,353
rank
168,142
PlumX Metrics