TY  - JOUR
AU  - Edwards,Sebastian
AU  - Yeyati,Eduardo Levy
TI  - Flexible Exchange Rates as Shock Absorbers
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9867
PY  - 2003
Y2  - July 2003
UR  - http://www.nber.org/papers/w9867
L1  - http://www.nber.org/papers/w9867.pdf
N1  - Author contact info:
Sebastian Edwards
UCLA Anderson Graduate School of Business
110 Westwood Plaza, Suite C508
Box 951481
Los Angeles, CA 90095-1481
Tel: 310/206-6797
Fax: 310/206-5825
E-Mail: sebastian.edwards@anderson.ucla.edu

Eduardo Levy Yeyati
Universidad Torcuato Di Tella
Escuela de Economia Empresarial
Minones 2177 (1428) Buenos Aires
ARGENTINA
Tel: 5411 4787-9349
Fax: 5411 47833220
E-Mail: ely@utdt.edu
M2  - featured in NBER digest on 2004-01-01
AB  - In this paper we analyze empirically the effect of terms of trade shocks on economic performance under alternative exchange rate regimes. We are particularly interested in investigating whether terms of trade disturbances have a smaller effect on growth in countries with a flexible exchange rate regime, than in countries with a more rigid exchange rate arrangement. We also analyze whether negative and positive terms of trade shocks have asymmetric effects on growth, and whether the magnitude of these asymmetries depends on the exchange rate regime. We find evidence suggesting that terms of trade shocks get amplified in countries that have more rigid exchange rate regimes. We also find evidence of an asymmetric response to terms of trade shocks: the output response is larger for negative than for positive shocks. Finally, we find evidence supporting the view that, after controlling for other factors, countries with more flexible exchange rate regimes grow faster than countries with fixed exchange rates.
ER  -