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

31 Pages Posted: 15 Feb 2006

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: December 1998

Abstract

This paper evaluates monetary policy and its relationship with the exchange rate in five Asian crisis countries. The findings are compared with previous currency crises in recent history. The paper finds no evidence of overly tight monetary policy in the Asian crisis countries in 1997 and early 1998, nor 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 called for the reversal of overly depreciated currencies through firmer monetary policy.

Keywords: Monetary policy, interest rates, inflation

JEL Classification: E44, E63

Suggested Citation

Goldfajn, Ilan and Baig, Taimur, Monetary Policy in the Aftermath of Currency Crises: The Case of Asia (December 1998). IMF Working Paper, Vol. , pp. 1-31, 1998. Available at SSRN: https://ssrn.com/abstract=883294

Ilan Goldfajn (Contact Author)

Gávea Investimentos ( email )

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

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Brazil

Central Bank of Brazil ( email )

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Taimur Baig

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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