What Makes a Currency Procyclical? An Empirical Investigation

This paper looks at the correlation between the cyclical components of gross domestic product and the exchange rate and classifies countries' currencies as procyclical if they appreciate in good times, countercyclical if they appreciate in bad...

Full description

Bibliographic Details
Main Authors:	Cordella, Tito, Gupta, Poonam
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank Group, Washington, DC 2014
Subjects:	foreign asset position currency float monetary policy exchange rate countercyclical currencies procyclical currencies currency cyclicality
Online Access:	http://documents.worldbank.org/curated/en/2014/11/20389463/makes-currency-procyclical-empirical-investigation-makes-currency-procyclical-empirical-investigation http://hdl.handle.net/10986/20651

id	okr-10986-20651
recordtype	oai_dc
spelling	okr-10986-206512021-04-23T14:03:59Z What Makes a Currency Procyclical? An Empirical Investigation Cordella, Tito Gupta, Poonam foreign asset position currency float monetary policy exchange rate countercyclical currencies procyclical currencies currency cyclicality This paper looks at the correlation between the cyclical components of gross domestic product and the exchange rate and classifies countries' currencies as procyclical if they appreciate in good times, countercyclical if they appreciate in bad times, and acyclical otherwise. With this classification, the paper shows that: (i) the countries that are commodity exporters and experience procyclical capital flows tend to have procyclical currencies; (ii) countries with procyclical currencies tend to restrict their capital accounts, perhaps as an attempt to reduce the degree of procyclicality; (iii) countries with procyclical currencies pursue procyclical monetary policy; (iv) however, in the last decade, there is a disconnect between the cyclicality of currency and monetary policy; and (v) the disconnect may reflect a decline in the fear of floating, which can be partially attributed to an improvement in countries' net foreign asset positions. 2014-12-03T23:22:15Z 2014-12-03T23:22:15Z 2014-11 http://documents.worldbank.org/curated/en/2014/11/20389463/makes-currency-procyclical-empirical-investigation-makes-currency-procyclical-empirical-investigation http://hdl.handle.net/10986/20651 English en_US Policy Research Working Paper;No. 7113 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Group, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	foreign asset position currency float monetary policy exchange rate countercyclical currencies procyclical currencies currency cyclicality
spellingShingle	foreign asset position currency float monetary policy exchange rate countercyclical currencies procyclical currencies currency cyclicality Cordella, Tito Gupta, Poonam What Makes a Currency Procyclical? An Empirical Investigation
relation	Policy Research Working Paper;No. 7113
description	This paper looks at the correlation between the cyclical components of gross domestic product and the exchange rate and classifies countries' currencies as procyclical if they appreciate in good times, countercyclical if they appreciate in bad times, and acyclical otherwise. With this classification, the paper shows that: (i) the countries that are commodity exporters and experience procyclical capital flows tend to have procyclical currencies; (ii) countries with procyclical currencies tend to restrict their capital accounts, perhaps as an attempt to reduce the degree of procyclicality; (iii) countries with procyclical currencies pursue procyclical monetary policy; (iv) however, in the last decade, there is a disconnect between the cyclicality of currency and monetary policy; and (v) the disconnect may reflect a decline in the fear of floating, which can be partially attributed to an improvement in countries' net foreign asset positions.
format	Publications & Research :: Policy Research Working Paper
author	Cordella, Tito Gupta, Poonam
author_facet	Cordella, Tito Gupta, Poonam
author_sort	Cordella, Tito
title	What Makes a Currency Procyclical? An Empirical Investigation
title_short	What Makes a Currency Procyclical? An Empirical Investigation
title_full	What Makes a Currency Procyclical? An Empirical Investigation
title_fullStr	What Makes a Currency Procyclical? An Empirical Investigation
title_full_unstemmed	What Makes a Currency Procyclical? An Empirical Investigation
title_sort	what makes a currency procyclical? an empirical investigation
publisher	World Bank Group, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2014/11/20389463/makes-currency-procyclical-empirical-investigation-makes-currency-procyclical-empirical-investigation http://hdl.handle.net/10986/20651
_version_	1764446953570041856

What Makes a Currency Procyclical? An Empirical Investigation

Similar Items