Exchange Market Pressure and Monetary Policy: Asia and Latin America in the 1990s

Evan Tanner ()

IMF Staff Papers, 2001, vol. 47, issue 3, 2

Abstract: Exchange market pressure (EMP), the sum of exchange rate depreciation and reserve outflows (scaled by base money), summarizes the flow excess supply of money in a managed exchange rate regime. This paper examines Brazil, Chile, Mexico, Indonesia, Korea, and Thailand, and finds that monetary policy affects EMP as generally expected: contractionary monetary policy helps to reduce EMP. The monetary policy stance is best measured by domestic credit growth (since interest rates contain both policy- and market-determined elements). In response to higher EMP, monetary authorities boosted domestic credit growth both in Mexico (confirming previous research) and in the Asian countries. Copyright 2001, International Monetary Fund

JEL-codes: E4 F3 F4 (search for similar items in EconPapers)
Date: 2001
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