Current Account Reversals and Currency Crises: Empirical Regularities

Gian Maria Milesi-Ferretti () and Assaf Razin

No 1998/089, IMF Working Papers from International Monetary Fund

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: WP; currency crisis; current account reversal; currency crash; terms of trade; current account deficit; growth; real exchange rate; depreciation vis-à-vis; currency depreciation; currency crisis episode; Current account; Current account deficits; Currency crises; Depreciation; Current account balance; Asia and Pacific; East Asia (search for similar items in EconPapers)
Pages: 44
Date: 1998-06-01
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Citations: View citations in EconPapers (140)

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Related works:
Chapter: Current Account Reversals and Currency Crises: Empirical Regularities (2000)
Working Paper: Current Account Reversals and Currency Crises: Empirical Regularities (1998)
Working Paper: Current Account Reversals and Currency Crises: Empirical Regularities (1998)
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