Growth dynamics, financial crises and exchange rate regimes

We empirically investigate the impact of financial crises and nominal exchange rate regime changes on growth dynamics. To that end, we estimate autoregressive models using panel data for 163 countries classified into four income groups during the period 1970-2011. Results suggest that financial crises significantly reduce short-run and long-run growth for high-income and lower-middle-income countries. In the case of the upper-middle-income countries, financial crises inflict a negative and statistically significant impact on short-run growth but only a marginally significant effect on long-run growth, while for lower-income countries they only have a short-run influence. As for the exchange rate regimes, we find that they only positively affect the short-run growth rate for lower-middle-income and low-income countries, not showing any significant impact on long-run growth rates.