The Impact of a Fixed Exchange Rate Regime on Growth and Volatility in an Oil-‐‑dependent Economy
By Shihab Osman Malik and Faisal Bandar Alsaadi
This study examines the relationship between the fixed exchange rate regime, economic growth, and output volatility in oil-‐‑producing Saudi Arabia over the post-‐‑Bretton Woods period (1973–2016). We assess the implications of the current exchange rate regime on macroeconomic and growth performance, and evaluate its sustainability in the context of oil-‐‑dependency and market dynamics. We develop and employ a theoretical framework and empirical specification based on previous literature to find that for Saudi Arabia, the fix is associated with faster growth and lower output volatility. We believe the result is primarily driven by the credibility of the fix in terms of establishing a strong nominal anchor and monetary policy framework.
Advisor: Lori Leachman | JEL Codes: E42, F31, F36, F41, O53
The Investment Cost of Currency Crises in Emerging Markets: An Empirical Treatment from 1994-2015
By Eric Ramoutar
Currency crises – large and sudden depreciations in the value of a country’s currency – have been an unfortunate by-product of increased financial openness over the last half century. This study extends the already vast literature on the impact of currency crises by estimating how currency crises affect domestic investment in emerging markets. Specifically, the study uses panel data with fixed effects and various robust standard errors as well as a generalized method of moments estimator to investigate the impact of currency crises on domestic investment in a sample of 14 countries that experienced currency crises between 1994 and 2015 and 10 that did not. The results of the analysis initially indicate that, after controlling for a host of macroeconomic fundamentals, currency crises contribute significantly to dampened domestic investment. Ultimately, after controlling for banking crises, the study concludes that relatively severe, but not all, currency crises have a significant depressing effect on investment. The results further indicate that all currency crises should not be treated equally; those involving exceptionally large depreciations lead to an even greater decline in domestic investment.
Advisor: Cosmin Ilut, Kent Kimbrough, Lori Leachman | JEL Codes: E4, F3, F4, E42, F31, F32, F41, G01
Understanding the Argentine Peso’s Devaluation in 2014 —Analysis on Argentina’s Fiscal Sustainability from 1993 to 2013
By Feng Pan
This research analyzes the fiscal sustainability of Argentina from 1993 to 2013. Specifically, it explains the peso devaluation in early 2014 and suggests that it is primarily due to the fundamental problems in Argentina’s economy. This paper highlights Argentina’s inability to enhance its fiscal conditions and suggests possible future economic developments in Argentina. This paper concludes that there is high
chance of hyperinflation, debt default, and the eventual dissolution of the managed exchange rate regime in Argentina in the future.
Advisor: Alison Hagy, Craig Burnside | JEL Codes: E43, E44, E52, E58, E62, F31 | Tagged: Argentine Peso, Exchange Rate, Fiscal Sustainability
