Monetary Impact of a Banking Crisis and the Conduct of Monetary Policy

83 Pages Posted: 12 May 1998

See all articles by Alicia García-Herrero

Alicia García-Herrero

Bruegel; Hong Kong University of Science & Technology (HKUST) - HKUST Institute for Emerging Market Studies (IEMS); Natixis

Date Written: September 1997

Abstract

The experiences of seven countries that have undergone banking crises show that crises have significant implications for the short-run stability of the demand for money, the money multiplier, the transmission mechanism, and the signal variables of monetary policy. Monetary and credit instability, coupled with changes in the nature of the monetary and credit aggregates, complicate monetary management. These findings may require redesigning monetary instruments in favor of faster-reacting instruments, such as open market operations, and introducing additional indicators of the monetary stance, such as asset price and exchange rate movements. More frequent reviews of monetary programs may also be necessary.

JEL Classification: E41, E65, G21

Suggested Citation

Garcia-Herrero, Alicia, Monetary Impact of a Banking Crisis and the Conduct of Monetary Policy (September 1997). IMF Working Paper No. 97/124, Available at SSRN: https://ssrn.com/abstract=86248 or http://dx.doi.org/10.2139/ssrn.86248

Alicia Garcia-Herrero (Contact Author)

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium, 1210
Belgium

Hong Kong University of Science & Technology (HKUST) - HKUST Institute for Emerging Market Studies (IEMS) ( email )

IAS 2019, Lo Ka Chung Building,
Lee Shau Kee Campus, HKUST
Clear Water Bay, Kowloon
Hong Kong

Natixis ( email )

France

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