Current Account Reversals and Currency Crises: Empirical Regularities

44 Pages Posted: 15 Feb 2006

See all articles by Gian Maria Milesi-Ferretti

Gian Maria Milesi-Ferretti

International Monetary Fund (IMF); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Assaf Razin

Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: June 1998

Abstract

This paper studies large reductions in current account deficits and exchange rate depreciations in low- and middle-income countries. It examines which factors help predict the occurrence of a reversal or a currency crisis, and how these events affect macroeconomic performance. Both domestic factors, such as the low reserves, and external factors, such as unfavorable terms of trade, are found to trigger reversals and currency crises. The two types of events are, however, distinct; an exchange rate crash is associated with a fall in output growth and a recovery thereafter, while for reversals there is no systematic evidence of a growth slowdown.

Keywords: currency crisis, current account reversal, growth, real exchange rate

JEL Classification: F32, F34

Suggested Citation

Milesi-Ferretti, Gian Maria and Razin, Assaf, Current Account Reversals and Currency Crises: Empirical Regularities (June 1998). IMF Working Paper, Vol. , pp. 1-44, 1998. Available at SSRN: https://ssrn.com/abstract=882598

Gian Maria Milesi-Ferretti (Contact Author)

International Monetary Fund (IMF) ( email )

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Assaf Razin

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