Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis?

Ilan Goldfajn and Poonam Gupta

IMF Staff Papers, 2003, vol. 50, issue 1, 5

Abstract: This paper provides evidence on the relationship between monetary policy and the exchange rate in the aftermath of currency crises. It analyzes a large dataset of currency crises in 80 countries for the period 1980-98. The main question addressed is whether monetary policy can increase the probability of reversing a postcrisis undervaluation through nominal appreciation rather than higher inflation. We find that tight monetary policy facilitates the reversal of currency undervaluation through nominal appreciation. When the economy also faces a banking crisis, the results are not robust and depend on the specification. Copyright 2003, International Monetary Fund

JEL-codes: E44 E63 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (31)

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Related works:
Working Paper: Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis? (1999)
Working Paper: Does monetary policy stabilize the exchange rate following a currency crisis? (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:pal:imfstp:v:50:y:2003:i:1:p:5

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