Does monetary policy stabilize the exchange rate following a currency crisis?
By: Goldfajn, Ilan.
Contributor(s): Gupta, Poonam.
Material type:
ArticlePublisher: 2003Description: p.90-114.Subject(s): Economic recession | Exchange rates | Monetary policy
In:
IMF Staff PapersSummary: This paper provides evidence on the relationship between monetary policy and the exchange rate in the aftermath of currency crises. It analzes a large dataset of currency crises in 80 countries for the period 1980-98. The main question addressed is whether monetary policy can increase the probability of reversing a postcrisis undervaluation through nominal appreciation rather than higher inflation. We find that tight monetary policy facilitates the reversal of currency undervaluation through nominal appreciation. When the economy also faces a banking crisis, the results are not robust and depend on the specification. - Reproduced.
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Articles
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Indian Institute of Public Administration | Volume no: 50, Issue no: 1 | Available | AR56880 |
This paper provides evidence on the relationship between monetary policy and the exchange rate in the aftermath of currency crises. It analzes a large dataset of currency crises in 80 countries for the period 1980-98. The main question addressed is whether monetary policy can increase the probability of reversing a postcrisis undervaluation through nominal appreciation rather than higher inflation. We find that tight monetary policy facilitates the reversal of currency undervaluation through nominal appreciation. When the economy also faces a banking crisis, the results are not robust and depend on the specification. - Reproduced.
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