Fear of appreciation and current account adjustment

• 成果类型: Article
• 署名作者: Bergin, Paul R.; Kim, Kyunghun; Pyun, Ju H.
• 署名单位: University of California System; University of California Davis; National Bureau of Economic Research; Hongik University; Korea University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2025.104121
• 发表日期: 2025
• 关键词: current account; Fear of appreciation; Exchange rate regime; Local projection; occasionally binding constraint

摘要

This paper finds that one-sided nominal exchange rate intervention in the form of fear of appreciation slows adjustment of current account surpluses, providing novel support for Friedman's claims of faster adjustment under flexible exchange rates. We find evidence that countries classified as more flexible have faster convergence than peggers for current account deficits, but not so for surpluses. This asymmetry is associated with a one-sided muting of exchange rate appreciations among some countries. We then develop a multi-country monetary model augmented with a fear of appreciation policy rule governing foreign exchange intervention, solved as an occasionally binding constraint. The model demonstrates a mechanism by which government capital flows supporting exchange rate regimes can impinge on international financial adjustment. The model accounts for substantial asymmetries in the speed of current account adjustment, based on exchange rate regime and current account sign.