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

Alex Miksjuk, Sam Ouliaris and Mikhail Pranovich

No 2015/281, IMF Working Papers from International Monetary Fund

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: WP; interest rate; exchange rate; monetary policy; currency crisis; exchange rate policies; fiscal policy; exchange rate objective; interest rate channel; B. monetary policy transmission; transmission mechanism; D. monetary policy regime; money stock; monetary policy transmission mechanism; long run monetary policy neutrality; monetary policy transmission channels; inflation high; A. monetary policy transmission; inflation expectation; Exchange rates; Wages; Monetary base; Wage policy; Inflation; long-run monetary policy neutrality (search for similar items in EconPapers)
Pages: 49
Date: 2015-12-29
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Citations: View citations in EconPapers (4)

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