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Explaining the Real Exchange Rate during Sudden Stops and Tranquil Periods

Author

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  • Akiko Terada-hagiwara

    (Asian Development Bank)

Abstract

This paper untangles the causes behind real exchange rate devaluation events with particular attention paid to the Sudden Stop of capital flows. By utilizing cumulative impulse response function and variance decomposition analysis, we argue that there is the asymmetric response across Sudden Stop and tranquil times. Further comparison across the Sudden Stop in the 80s ("debt crisis") and 90s ("Sudden Stop crisis"), however, reveals that the Sudden Stop disturbance has become more prominent in explaining the real exchange rate disturbance in Sudden Stop crisis of the 1990s rather than debt crisis of the 1980s.

Suggested Citation

  • Akiko Terada-hagiwara, 2005. "Explaining the Real Exchange Rate during Sudden Stops and Tranquil Periods," International Finance 0504006, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpif:0504006
    Note: Type of Document - pdf; pages: 34
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/if/papers/0504/0504006.pdf
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    References listed on IDEAS

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    Cited by:

    1. Levan Efremidze & Samuel M. Schreyer & Ozan Sula, 2011. "Sudden stops and currency crises," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 3(4), pages 304-321, November.

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    More about this item

    Keywords

    Exchange rate depreciation; Capital flows; Sudden Stop; Asia; and Latin America;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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