Crisis and Recovery

This paper examines the role of the exchange rate regime in explaining how emerging market economies fared in the recent global financial crisis, particularly in terms of output losses and growth resilience. After controlling for regime switches during the crisis, using alternative definitions for pegs, and taking account of other likely determinants, we find that the growth performance for pegs was not different from that of floats during the crisis. For the recovery period 2010-11, pegs appear to be faring worse, with growth recovering more slowly than floats. These results suggest an asymmetric effect of the regime during and recovering from the crisis. We also find that proxies of the trade and financial channels are important determinants of growth performance during the crisis, while only the trade channel appears important for the recovery thus far.Currency pegs;Economic growth;Economic recovery;Exchange rate regimes;Floating exchange rates;exchange rate regime, exchange rate, current account balance, terms of trade, trading partner, exchange rate arrangements, short-term debt, trading partners, exchange rate regime classification, trade shock, flexible exchange rate, exchange rate flexibility, current account deficit, trade integration, real exchange rate, flexible exchange rate regimes, exchange rate overvaluation, reserve holdings, exchange restrictions, transmission of shocks, exchange rate volatility, trade shocks, exchange rate regime classifications, terms of trade shocks, classification of exchange rate, real exchange rates, intermediate exchange rate regimes, exchange reserves, foreign exchange, de facto exchange rate regime, real exchange rate volatility, fixed exchange rate, oil exporter, intermediate exchange rate, exchange rates, external shocks, foreign exchange reserves