Open Economies Review

, Volume 24, Issue 3, pp 471–494

The Macroeconomic Effects of Large Exchange Rate Appreciations

  • Marcus Kappler
  • Helmut Reisen
  • Moritz Schularick
  • Edouard Turkisch
Research Article


Although currency adjustment is often proposed as a policy tool to reduce current account imbalances, there is no consensus regarding the macroeconomic effects. In this paper we study the macroeconomic aftermath of large exchange rate appreciations. Using a sample of 128 countries over the period 1960–2008, we identify 25 episodes of large nominal and real appreciations shocks. We use narrative identification of exogenous appreciation episodes and study the macroeconomic effects in a dummy-augmented panel autoregressive model. Our results indicate that exchange rate appreciations tend to have strong effects on current account balances. Within 3 years after the appreciation event, the current account balance on average deteriorates by three percentage points of GDP. This effect occurs through a reduction of savings without a meaningful reduction in investment. Real export growth slows down substantially, but the output costs are small and not statistically significant. All these effects appear somewhat more pronounced in developing countries.


Current account adjustment Global imbalances Exchange rate adjustment Real exchange rates 


F4 F31 F32 N10 O16 

Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  • Marcus Kappler
    • 1
  • Helmut Reisen
    • 2
  • Moritz Schularick
    • 3
  • Edouard Turkisch
    • 4
  1. 1.ZEWMannheimGermany
  2. 2.OECD Development CentreParis Cedex 16France
  3. 3.Freie Universität Berlin, John F. Kennedy InstituteBerlinGermany
  4. 4.OECD Development CentreParis Cedex 16France

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