Do fixers perform worse than non-fixers during global recessions and recoveries?

Terrones, Marco E.

doi:10.1016/j.jimonfin.2020.102160

Cited by 10 publications

(8 citation statements)

References 36 publications

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“…In the second case, the conventional wisdom is that in the face of external shocks, the economies of flexible exchange rate countries improve quickly and robustly (Cerra & Saxena, 2008;Cerra et al, 2009;Hegarty & Wilson, 2017;Terrones, 2019). The flexible exchange rate functions as a shock absorber that automatically adjusts to mitigate the impact of the shock.…”

Section: Discussionmentioning

confidence: 99%

Recessions and recoveries in Central African countries: Lessons from the past

Djoukouo

2022

J of Intl Development

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The Great Financial Crisis and the COVID-19 pandemic have raised concerns about business cycles. In this paper, we examine the dynamics of past business cycles in CAEMC economies to infer the shapes of recessions and subsequent recoveries. We use annual GDP data covering the period 1960-2020 and non-parametric approach. The main results are fourfold. First, recessions are, on average, long with a positive duration dependence relationship and the strength of recoveries is independent of the duration and the depth of the associated recessions. Second, recessions and recoveries are not all alike, meaning that history cannot be used as a guide for forecasting issue. Third, nearly 45% of the recessions and subsequent recoveries are V-shaped, and the L, U and W patterns appear when governments are heavily indebted. Fourth, a regional cycle sometimes emerges. The results suggest a strengthening of the capacities of CAEMC states and a resilient supply chain management.

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Section: Discussionmentioning

confidence: 99%

Recessions and recoveries in Central African countries: Lessons from the past

Djoukouo

2022

J of Intl Development

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“…However, in spite of this theoretical ambiguity empirical evidence finds that flexible exchange rate regimes tend to be more effective in stabilizing output (Hausmann and Gavin 1996;Levy-Yeyati and Sturzenegger 2003;Aizenman et al 2018). Flexible rate regimes can also help countries recover more quickly from commodity price shocks and global recessions than pegs (Roch 2019;Terrones 2020) and mitigate the transmission of global financial shocks to domestic financial markets (Obstfeld, Ostry, and Qureshi 2019). In this sense, flexible exchange rates can reduce output volatility and be an income-equalizing force during the recovery stage of the business cycle.…”

Section: Exchange Rate Managementmentioning

confidence: 99%

Macroeconomic Stability, Adjustment, and Debt

Davoodi¹,

Montiel²,

Ter-Martirosyan³

2021

How to Achieve Inclusive Growth

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The chapter surveys the literature on the relationship between macroeconomic stability and inclusive growth and identify gaps in our knowledge. It examines the role of macroeconomic policies (fiscal, monetary, macroprudential, and exchange rate) and measures of inclusiveness (income inequality, consumption inequality, wealth inequality, poverty, and unemployment) across countries at different income levels. Avoiding procyclical macroeconomic policies and mitigating macroeconomic volatility should be on the agenda of all policymakers concerned with promoting inclusive growth. The emerging theory and evidence suggest a strong role for macroeconomic policies in shaping inclusive growth, both in the short-run and the long-run. The two-way relationship between the macroeconomy and inequality underscores the challenge of identifying and estimating causal relationships. Models with heterogeneous agents have much to offer in this area.

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“…Edwards and Levy Yeyati ( 2005) use 186 countries and do not have separate results for LICs. Terrones (2020) and Rose (2014) look at the impact of the global financial crisis in a sample of countries not exclusively devoted to LICs, and do not explaining differences in growth according to the level of development. Studies estimating the impact of changes in money or interest rates on real output in LICs rely mostly on estimating structural VARs (Mishra and Montiel, 2012).…”

Section: Literaturementioning

confidence: 99%

Do Monetary Policy Frameworks Matter in Low Income Countries?

Carare¹,

Resende²,

Zhang³

2021

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In recent years, many Low-Income Countries (LICs) have implemented substantial reforms to their monetary policy frameworks, but existing economic research has not provided a clear rationale to guide those efforts. In this paper we analyze the role of monetary policy frameworks in the propagation of aggregate shocks, using a large panel dataset of 79 LICs over the period 1990-2015 as well as event study analysis for a group of 28 sub-Saharan African LICs. We find highly significant differences in the propagation of external shocks between the LICs that target monetary aggregates or inflation compared to those that maintain rigid nominal exchange rates as a nominal anchor. We also find that the large surprise devaluation of the Central African Franc (CFA) in January 1994 had highly significant effects on the GDP growth of 10 CFA countries compared to 18 similar countries that were outside the CFA zone. Our empirical analysis provides strong support for the role of monetary policy frameworks in facilitating macroeconomic stability in LICs-a conclusion that is particularly relevant as LICs now face a multitude of similar shocks associated with the global COVID-19 pandemic.

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Do fixers perform worse than non-fixers during global recessions and recoveries?

Cited by 10 publications

References 36 publications

Recessions and recoveries in Central African countries: Lessons from the past

Recessions and recoveries in Central African countries: Lessons from the past

Macroeconomic Stability, Adjustment, and Debt

Do Monetary Policy Frameworks Matter in Low Income Countries?

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