Premium
CURRENT ACCOUNT ADJUSTMENT IN DEVELOPING COUNTRIES: THE ROLE OF EXCHANGE RATE REGIMES
Author(s) -
MU XIAOYI,
YE HAICHUN
Publication year - 2013
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.2012.00502.x
Subject(s) - current account , economics , exchange rate , current (fluid) , econometrics , notice , developing country , variety (cybernetics) , monetary economics , macroeconomics , statistics , mathematics , physics , thermodynamics , economic growth , law , political science
This article employs hazard models to investigate the role of exchange rate regimes in the timing of current account adjustment in developing countries. We identify high current account deficit spells and find that fixed exchange rate regimes increase the duration of high deficit spells and thus delay current account adjustment. The result is robust to a variety of model specifications and alternative classifications of exchange rate regimes. When distinguishing between hard pegs and soft pegs, we notice that the delay in the current account adjustment is primarily driven by hard pegs rather than soft pegs . ( JEL F3, F4)