Asian Exchange Rates during the Credit Crisis: Policies to Avoid Depreciation
Mark Witte ()
Global Economic Review, 2010, vol. 39, issue 1, 15-24
A few policy recommendations become apparent to avoid depreciation relative to other regional currencies when examining intra-Asian exchange rates during the most recent credit crisis. One, avoid large fiscal deficits. Two, avoid high inflation and current account deficits in order to maintain low interest rates to avoid depreciation from the unwinding of the carry trade. Third, build large official reserves or, more importantly, build large reserves of foreign currency assets. Additional results show an unexplained depreciation of the Australian dollar and the Indian rupee and appreciation of the Thai baht as the TED spread widened and credit crisis worsened.
Keywords: Interest rates; flexible exchange rates; credit crisis; carry trade; TED spread (search for similar items in EconPapers)
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