Pick Your Poison: The Exchange Rate Regime and Capital Account Volatility in Emerging Markets
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Summary:
We characterize a country's exchange rate regime by how its central bank channels a capital account shock across three variables: exchange depreciation, interest rates, and international reserve flows. Structural vector autoregression estimates for Brazil, Mexico, and Turkey reveal such responses, both contemporaneously and over time. Capital account shocks are further shown to affect output growth and inflation. The nature and magnitude of these effects may depend on the exchange rate regime.
Series:
Working Paper No. 2003/092
Subject:
Balance of payments Capital account Exchange rate arrangements Exchange rate flexibility Exchange rates Foreign exchange Inflation Prices
English
Publication Date:
May 1, 2003
ISBN/ISSN:
9781451851618/1018-5941
Stock No:
WPIEA0922003
Pages:
28
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