Macroeconomic Policy Making, Exchange Rate Adjustment and Current Account Imbalances in Emerging Markets

Arbeitspapier

Since a series of crisis events after 2007, the discussion about the adjustment channels of current account imbalances has been revived. We discuss the effectiveness of exchange rates versus macroeconomic policies to rebalance current accounts for a set of 86 mainly emerging market economies. We find that nominal exchange rates are not a sufficient adjustment channel for (unsustainable) current account positions. Instead, depending on the region, monetary and/or fiscal policies are the main determinants of current accounts. For East Asia and the oil exporting countries sterilization policies, i.e. relatively tight monetary policies, are the main determinants. In contrast the main driving forces for emerging and southern Europe are fiscal policy stances. Only for the Latin American countries the exchange rate seems to play a significant role.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 5064

Classification and Topics

• Classification: Wirtschaft ; Economic Growth of Open Economies ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems ; Foreign Exchange
• Subject: global imbalances ; intra-european imbalances ; exchange rate adjustment ; monetary policy ; fiscal policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Duarte, Pablo ; Schnabl, Gunther
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/105142
• Last update: 10.03.2025, 11:45 AM CET