Exchange rate volatility, financial crisis and large output loss: stylized facts and some useful theories

Abstract

IN RECENT TIMES CERTAIN COUNTRIES OR REGIONS HAVE EXPERIENCED SEVERE FINANCIAL CRISES WITH LARGE OUTPUT LOSS. THIS HAS OCCURRED WHETHER THE EXCHANGE RATES WERE PEGGED OR FLEXIBLE. THERE APPEAR TO BE BASIC MECHANISMS AT WORK FROM WHICH EVEN FLEXIBLE EXCHANGE RATE REGIMES CANNOT ESCAPE. THIS PAPER REVIEWS SOME OF THE STYLIZED.