What Makes a Currency Procyclical? An Empirical Investigation

Cordella, Tito ; Gupta, Poonam

World Bank Group, Washington, DC

关键词: foreign asset position;    currency float;    monetary policy;    exchange rate;    countercyclical currencies;   

DOI  :  10.1596/1813-9450-7113
RP-ID  :  WPS7113

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper looks at the correlationbetween the cyclical components of gross domestic productand the exchange rate and classifies countries'currencies as procyclical if they appreciate in good times,countercyclical if they appreciate in bad times, andacyclical otherwise. With this classification, the papershows that: (i) the countries that are commodity exportersand experience procyclical capital flows tend to haveprocyclical currencies; (ii) countries with procyclicalcurrencies tend to restrict their capital accounts, perhapsas an attempt to reduce the degree of procyclicality; (iii)countries with procyclical currencies pursue procyclicalmonetary policy; (iv) however, in the last decade, there isa disconnect between the cyclicality of currency andmonetary policy; and (v) the disconnect may reflect adecline in the fear of floating, which can be partiallyattributed to an improvement in countries' net foreignasset positions.