Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis?
Author | : Mr.Ilan Goldfajn |
Publisher | : International Monetary Fund |
Total Pages | : 33 |
Release | : 1999-03-01 |
ISBN-10 | : 9781451846195 |
ISBN-13 | : 1451846193 |
Rating | : 4/5 (193 Downloads) |
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.