Monetary Policy in the Aftermath of Currency Crises: The Case of Asia

45 Pages Posted: 3 Mar 1999

See all articles by Ilan Goldfajn

Ilan Goldfajn

Gávea Investimentos; Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics; Central Bank of Brazil

Taimur Baig

International Monetary Fund (IMF)

Multiple version iconThere are 3 versions of this paper

Date Written: October 1998

Abstract

This paper evaluates monetary policy and its relationship with the exchange rate in the five Asian crisis countries. The findings are compared to previous currency crises in recent history. The paper finds that there is no evidence of overly tight monetary policy in the Asian crisis countries in 1997 and early 1998. There is also no evidence that high interest rates led to weaker exchange rates. The usual trade-off between inflation and output when raising interest rates suggested the need for a softer monetary policy in the crisis countries to combat recession. However, in some countries, corporate balance sheet considerations suggested the need to reverse overly depreciated currencies through firmer monetary policy.

JEL Classification: E44, E63

Suggested Citation

Goldfajn, Ilan and Baig, Taimur, Monetary Policy in the Aftermath of Currency Crises: The Case of Asia (October 1998). Available at SSRN: https://ssrn.com/abstract=142275 or http://dx.doi.org/10.2139/ssrn.142275

Ilan Goldfajn

Gávea Investimentos ( email )

Rua Dias Ferreira, 190 7th andar
22431-050 Rio de Janeiro
Brazil

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics ( email )

Rua Marques de Sao Vicente, 225/206F
Rio de Janeiro, RJ 22453
Brazil

Central Bank of Brazil ( email )

P.O. Box 08670
SBS Quadra 3 Bloco B - Edificio-Sede
Brasilia DF 70074-900, Distr. Federal 70074-900
Brazil
61-4143232 (Phone)
61-2260767 (Fax)

Taimur Baig (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
(202) 623-8790 (Phone)
(202) 244-4505 (Fax)

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