An empirical assessment of currency devaluation in East Asian countries

Yoonbai Kim, Yung Hsiang Ying

Research output: Contribution to journalArticle

37 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)265-283
Number of pages19
JournalJournal of International Money and Finance
Volume26
Issue number2
DOIs
Publication statusPublished - 2007 Mar 1

Keywords

  • Contractionary effects
  • Devaluation
  • East Asia

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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