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Persistence Of Output Fluctuations Under Alternative Exchange Rate Regimes

Author

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  • Mark Crosby

    (Department of Economics, University of Melbourne)

  • Glenn Otto

    (School of Economics, University of New South Wales)

Abstract

In a recent paper Giugale and Korobow (2000) present evidence to suggest the time that output takes to return to its trend following a negative shock is faster under a flexible exchange rate regime than under a fixed exchange rate. In this paper VAR models are used to provide empirical evidence on the speed of recovery of real output following an interest rate shock for a number of Asian economies. We find little evidence that the degree of persistence in output is systematically related to the type of exchange rate regime that particular countries have adopted. Across a number of specifications we find that real output for Hong Kong and Australia has the least persistence following a negative interest rate shock. These countries represent the two ends of the spectrum, the former has an exchange rate that is pegged to the U.S. dollar via a currency board and the latter has one of the more flexible exchange rates in the Asian region.

Suggested Citation

  • Mark Crosby & Glenn Otto, 2001. "Persistence Of Output Fluctuations Under Alternative Exchange Rate Regimes," Working Papers 072001, Hong Kong Institute for Monetary Research.
    • Handle: RePEc:hkm:wpaper:072001
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    References listed on IDEAS

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    Cited by:

    1. Po-Chin Wu & Chung-Chih Lee, 2018. "The non-linear impact of monetary policy on international reserves: macroeconomic variables nexus," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(1), pages 165-185, February.
    2. Ben S.C. Fung, 2002. "A VAR analysis of the effects of monetary policy in East Asia," BIS Working Papers 119, Bank for International Settlements.

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