Re-Establishing Credible Nominal Anchors after a Financial Crisis: A Review of Recent Experience

45 Pages Posted: 29 Jan 2006

See all articles by Andrew Berg

Andrew Berg

International Monetary Fund (IMF) - Developing Country Studies Division

Christopher Jarvis

London School of Hygiene & Tropical Medicine - Department of Infectious Disease and Epidemiology

Mark Stone

International Monetary Fund (IMF)

A. Zanello

International Monetary Fund (IMF)

Date Written: April 2003

Abstract

This paper studies the question of how to achieve monetary policy credibility and price stability after a financial crisis. We draw stylized facts and conclusions from ten recent cases: Brazil (1999); Bulgaria (1997); Ecuador (2000); Indonesia (1997); Korea (1997); Malaysia (1997); Mexico (1994), Russia (1998); Thailand (1997); and Turkey (2001). Among our conclusions, highlights include: (i) monetary policy alone cannot stabilize; (ii) floats bring nominal stability quickly in countries with low pre-crisis inflation and hard pegs have been at least narrowly successful for countries in deeper disarray; (iii) in floats, early and determined tightening brings nominal stability and does not appear more costly for output; (iv) monetary aggregate targeting rarely serves as a coherent framework for floats; informal or full-fledged inflation targeting offers more promise.

Keywords: Financial crisis, monetary policy, nominal anchor

JEL Classification: E52, E63, E65

Suggested Citation

Berg, Andrew and Jarvis, Christopher and Stone, Mark and Zanello, A., Re-Establishing Credible Nominal Anchors after a Financial Crisis: A Review of Recent Experience (April 2003). Available at SSRN: https://ssrn.com/abstract=879152 or http://dx.doi.org/10.2139/ssrn.879152

Andrew Berg (Contact Author)

International Monetary Fund (IMF) - Developing Country Studies Division ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-8843 (Phone)
202-589-8843 (Fax)

Christopher Jarvis

London School of Hygiene & Tropical Medicine - Department of Infectious Disease and Epidemiology

United Kingdom

Mark Stone

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

A. Zanello

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
89
Abstract Views
797
rank
358,686
PlumX Metrics