Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis?

Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis?
Author :
Publisher : International Monetary Fund
Total Pages : 33
Release :
ISBN-10 : 9781451846195
ISBN-13 : 1451846193
Rating : 4/5 (193 Downloads)

Book Synopsis Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis? by : Mr.Ilan Goldfajn

Download or read book Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis? written by Mr.Ilan Goldfajn and published by International Monetary Fund. This book was released on 1999-03-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides evidence on the relationship between monetary policy and the exchange rate in the aftermath of currency crises. It analyzes a large data set of currency crises in 80 countries for the period 1980-98. The main question addressed is: Can monetary policy 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: depending on the specification, tight monetary policies may not have the same effect.


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