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Current-Account Adjustments and Exchange-Rate
Blaise Gnimassoun - Valérie Mignon
eBook Edition: 2013
 
This paper aims at studying current-account imbalances by paying a particular attention to exchange-rate misalignments. We rely on a nonlinear model linking the persistence of currentaccount imbalances to the deviation of the exchange rate to its equilibrium value. Estimating a panel smooth transition regression model on a sample of 22 industrialized countries, we show that persistence of current-account imbalances strongly depends on currency misalignments. More specifically, while there is no persistence in cases of currency undervaluation or weak overvaluation, persistence tends to augment for overvaluations higher than 11%. In addition, whereas disequilibria are persistent even for very low overvaluations in the euro area, persistence is observed only for overvaluations higher than 14% for non-eurozone members.(From Author)

eBook Contents

Highlights - Abstract - Points clefs - Résumé court - Introduction - A brief review of the literature -  Methodology - Data and equilibrium values - PSTR estimation results - Conclusion - References - Appendix

eBook License: Copyrighted (Personal Use Only by downloading from CEPII)

Free PDF eBook - 448 Kb - 31 Pages