Output Response to Currency Crises

By Ratna Sahay, Deepak Mishra, Poonam Gupta

November 1, 2003

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Format: Chicago

Ratna Sahay, Deepak Mishra, and Poonam Gupta. Output Response to Currency Crises, (USA: International Monetary Fund, 2003) accessed December 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper analyzes the behavior of output during currency crises using a sample of 195 crisis episodes in 91 developing countries during 1970-98. It finds that more than two-fifths of the crises in the sample were expansionary, and that output contraction was greater in large and more developed economies than in small and less developed economies. Currency crises have not been any more contractionary in the 1990s than in the previous two decades. Countries that traded less with the rest of the world, that had a relatively open capital account, and where crises were preceded by large capital inflows were more likely to be associated with contraction during crises. The contraction was more pronounced if trade competitors devalued, oil prices rose during the crisis, and postcrisis period was marked by tight monetary policy and expansionary fiscal policy.

Subject: Currency crises, Debt burden, Emerging and frontier financial markets, External debt, Financial crises, Financial markets

Keywords: Banking crisis dummy, Contractionary crisis, Crisis, Crisis year, Currency, Currency crises, Currency crisis, Debt burden, East Asia, Emerging and frontier financial markets, Emerging markets, Global, Output crisis, Output growth, Sc, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/230
Stock No:

WPIEA2302003
ISBN:

9781451875522
ISSN:

1018-5941

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