The Game of Anchors: Studying the Causes of Currency Crises in Belarus

50 Pages Posted: 17 Feb 2016

See all articles by Alex Miksjuk

Alex Miksjuk

National Bank of the Republic of Belarus; International Monetary Fund (IMF)

Mikhail Pranovich

University of Cambridge; International Monetary Fund (IMF); Joint Vienna Insitute

Sam Ouliaris

International Monetary Fund (IMF)

Date Written: December 2015

Abstract

Belarus experienced a sequence of currency crises during 2009-2014. Our empirical results, based on a structural econometric model, suggest that the activist wage policy and extensive state program lending (SPL) conflicted with the tightly managed exchange rate regime and suppressed monetary policy transmission. This created conditions for the unusually frequent crises. At the current juncture, refocusing monetary policy from exchange rate to inflation would help to avoid disorderly external adjustments. The government should abandon wage targets and phase out SPL to remove the underlying source of the imbalances and ensure lasting stabilization.

Keywords: currency crisis, exchange rate policies, currency, exchange rate, monetary policy, currency crises, economy, Time-Series Models, Monetary Policy (Targets, Instruments, and Effects), Open Economy Macroeconomics

JEL Classification: C32, E42, E52, E61, F31, F41

Suggested Citation

Miksjuk, Alexei and Pranovich, Mikhail and Pranovich, Mikhail and Ouliaris, Sam, The Game of Anchors: Studying the Causes of Currency Crises in Belarus (December 2015). IMF Working Paper No. 15/281, Available at SSRN: https://ssrn.com/abstract=2733583

Alexei Miksjuk (Contact Author)

National Bank of the Republic of Belarus ( email )

Nezavisimosti 20
Minsk, 220050
Belarus

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Mikhail Pranovich

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

University of Cambridge

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Joint Vienna Insitute

Mariahilferstrasse 97
Wien, A-1090
Austria

Sam Ouliaris

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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