An empirical inquiry into the role of sectoral diversification in exchange rate regime choice

This paper investigates empirically the persistence in exchange rate regimes as well as the role of capital account openness and financial sector health (measured by financial development and financial sector fragility) in exchange rate regime determination for a panel of 143 countries covering the post‐Bretton Woods period. The results demonstrate that while low‐ and high‐income countries exhibit highly persistent exchange rate regimes, middle‐income countries display relatively lower persistence. For middle‐income countries, capital account openness and the level of financial development play important roles in exchange rate regime choice. The fragility of the financial sector does not affect the exchange rate regime determination.

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“…Therefore, a continuous measure can be assumed, at least initially. 7 See Chowdhury et al (2014) in this vein.…”

Section: (Ii) Estimation Methodsmentioning

confidence: 99%

Persistence, Capital Account Openness, and Financial Sector Health in Exchange Rate Regime Choice

et al. 2015

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“…We have constructed two instrumental variables based on the data of each country's latitude and imported automotive products. Following existing methods [56], we use the reciprocal of each country's latitude multiplied by their total value of imported automotive products. Then, we take the third-order lag of the imported automotive products multiplied by the reciprocal latitude and the square of the third-order lag term as the instruments.…”

Section: Plos Onementioning

confidence: 99%

“…Finally, we use the third-order lag and square term because there are a time-lag effect and non-linear effects for the imported automotive products affecting air pollution. In addition, for the current period, the lagged variable is predetermined, and it might not be related to the disturbance term [56].…”

Section: Plos Onementioning

confidence: 99%

Air pollution, general government public-health expenditures and income inequality: Empirical analysis based on the spatial Durbin model

2020

PLoS ONE

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Environmental pollution and income inequality are important issues related to sustainable economic and social development. Air pollution affects residents' physical health, and income inequality affects social stability and economic development. No scholar has yet confirmed the causal impact of air pollution on income inequality; therefore, this study is an important extension of the environmental Kuznets curve theory. This article examines the impact using balanced panel data from 156 countries (2004-2017) and applies the spatial Durbin model to analyze the mechanism of air pollution's impact on income inequality from the perspective of public health. The results prove the following. First, increasing air pollution does increase income inequality. Second, the spatial spillover effect of air pollution constitutes a relatively important part of the total effect of air pollution on income inequality compared with the direct effect. Third, general government public-health expenditures are an important transmission channel by which air pollution affects income inequality. The conclusions of the research have some important policy implications for environmental governance and income distribution policies at the national as well as supranational level.

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“…To satisfy the above two characteristics of the instrumental variables, we selected each country's latitude and carbon dioxide (CO 2 ) emissions per unit of GDP to construct the instrumental variables (Du et al 2013;Chowdhury et al 2014). Namely, we used the squared term of the fifth-order lag of air pollution and the cube term of the fifth-order lag of the carbon dioxide (CO 2 ) emissions per unit of GDP in each country divided by the latitude of the country.…”

Section: Endogeneitymentioning

confidence: 99%

Air pollution, demographic structure, and the current account: an extended life-cycle model

2020

Environ Sci Pollut Res

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Air pollution has an important impact on both human health and sustainable economic development. The relationship of the current account, which is an important carrier of international economic activity, with air pollution has rarely been discussed by scholars. This paper aims to investigate how air pollution affects the current account and the mechanism of this effect. We conducted a theoretical analysis of the relationship between air pollution and the current account by adopting an extended form of the life-cycle model. Then, we used panel data (2000-2017) from 159 countries and the panel double fixed-effect method to empirically test the theoretical outcomes. We found that an increase in the degree of air pollution in a country leads to the deterioration of the domestic current account. In addition, air pollution changes the current account by affecting the demographic structure, following the "air pollution→demographic structure→current account" mechanism. The study also tested the robustness of the benchmark results by solving endogeneity problems, subsample regression and controlling measurement errors. Our findings are an important expansion and innovation for the research about the current account and have important implications for external economic equilibrium and sustainable economic development.

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An empirical inquiry into the role of sectoral diversification in exchange rate regime choice

Cited by 22 publications

References 35 publications

Persistence, Capital Account Openness, and Financial Sector Health in Exchange Rate Regime Choice

Persistence, Capital Account Openness, and Financial Sector Health in Exchange Rate Regime Choice

Air pollution, general government public-health expenditures and income inequality: Empirical analysis based on the spatial Durbin model

Air pollution, demographic structure, and the current account: an extended life-cycle model

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