Lending Booms, Sharp Reversals and Real Exchange Rate Dynamics

Citation:

Gopinath, Gita. 2004. “Lending Booms, Sharp Reversals and Real Exchange Rate Dynamics.” Journal of International Economics 62 (1): 1-23.
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Abstract:

Emerging markets in the 1990s experienced periods of booms followed by collapses in gross domestic product, consumption, traded and non-traded sector output and real exchange rate movements alongside unprecedented movements in foreign investor participation in these economies. An important feature of these episodes is the asymmetry in the pattern of booms and collapses. We introduce a natural search friction into the foreign investment decision in a small open economy and demonstrate that this can generate the asymmetry observed in the data. The magnitude of the reversals predicted by the model can be quantitatively large and empirically relevant.

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Bibtext

DOI:10.1016/j.jinteco.2003.08.002

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Winner of the Bhagwati prize for the best paper published in the Journal of International Economics during 2003-2004.
Bhagwati Prize: http://www.economics.harvard.edu/faculty/gopinath/files/bhagwati.pdf
Last updated on 03/28/2018