Data for: Current account dynamics, real exchange rate adjustment, and the exchange rate regime in emerging-market economies

This study examines two related hypotheses: (i) that real exchange rate adjustment promotes the rebalancing of the current account and (ii) that a flexible nominal exchange rate facilitates real exchange rate adjustment and thus the rebalancing of the current account.

Evidence from an event-study analysis for a large set of emerging-market economies over the period 1975–2008 indicates that real exchange rate adjustment has contributed significantly to reducing current account imbalances. The adjustment of current account deficits in countries with a fixed exchange rate regime typically occurs through an exchange rate crisis, and substantial costs in terms of forgone output are incurred.