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α: calibrated so average coauthorship-adjusted count equals average raw count
The acceleration in the formation of global imbalances in the period preceding the last financial crisis prompted a revival of the debate on whether exchange rate regimes affect the flexibility of the current account (i.e. its degree of mean reversion), as originally proposed by Friedman (1953). I analyse this relation systematically using a panel of 180 countries over the 1960–2007 period. I find robust evidence that flexible exchange rate arrangements deliver a faster current account adjustment among non-industrial countries. Additionally, I try to identify channels through which this effect could be taking place. The results suggest that exports respond to expenditure-switching behaviour by consumers when faced with changes in international relative prices, configuring a potential channel.