Article ID Journal Published Year Pages File Type
963710 Journal of International Money and Finance 2007 19 Pages PDF
Abstract
The hypothesis of contractionary devaluation has received surprisingly strong empirical support, especially in the context of Latin American countries. In this paper, we study whether it applies equally well in seven East Asian countries. When we use the pre-1997 crisis data and the trade-weighted exchange rate, we find no evidence of contractionary devaluations. In fact, currency devaluation appears strongly expansionary in several countries. This is contrasted to the case of Chile and Mexico where the evidence of devaluation is persistent. We find that the results are somewhat sensitive to the definition of the exchange rate and the period of estimation.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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