The macroeconomic effects of large exchange rate appreciations

Arbeitspapier

In this paper we study the macroeconomic effects of large exchange rate appreciations. Using a sample of 128 countries from 1960-2008, we identify large nominal and real appreciations shocks and study their macroeconomic effects in a dummy-augmented panel autoregressive model. Our results show that an exchange rate appreciation can have strong effects on current account balances. Within three years after the appreciation event, the current account balance on average deteriorates by three percentage points of GDP. This effect occurs through a reduction of savings without a meaningful reduction in investment. Real export growth slows down substantially, while imports remain by and large unaffected. The output costs of appreciation are small and not statistically significant, indicating a shift towards domestic sources of growth. All these effects appear somewhat more pronounced in developing countries.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 11-016

Classification and Topics

• Classification: Wirtschaft ; Foreign Exchange ; Current Account Adjustment; Short-term Capital Movements ; Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: General, International, or Comparative ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
• Subject: Current account adjustment ; global imbalances ; exchange rate changes

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kappler, Marcus ; Reisen, Helmut ; Schularick, Moritz ; Turkisch, Edouard
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (where): Mannheim
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/44467
• URN: urn:nbn:de:bsz:180-madoc-31440
• Last update: 10.03.2025, 11:42 AM CET