OECD Development Centre Working Papers

1815-1949 (en ligne)
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The OECD Development Centre links OECD members with developing and emerging economies and fosters debate and discussion to seek creative policy solutions to emerging global issues and development challenges. This series of working papers is intended to disseminate the OECD Development Centre’s research findings rapidly among specialists in the field concerned. These papers are generally available in the original English or French, with a summary in the other language.

The Macroeconomic Effects of Large Exchange Rate Appreciations You or your institution have access to this content

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Marcus Kappler, Helmut Reisen, Moritz Schularick, Edouard Turkisch1
Author Affiliations
  • 1: OECD, France

01 fév 2011
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In this paper we study the macroeconomic effects of large exchange rate appreciations. In a sample of 128 countries since 1960, we identify 25 episodes of 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. However, 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.
exchange rate changes, current account adjustment, global imbalances
Classification JEL:
  • F31: International Economics / International Finance / Foreign Exchange
  • F32: International Economics / International Finance / Current Account Adjustment ; Short-Term Capital Movements
  • F4: International Economics / Macroeconomic Aspects of International Trade and Finance
  • N10: Economic History / Macroeconomics and Monetary Economics ; Industrial Structure ; Growth ; Fluctuations / General, International, or Comparative
  • O16: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance
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