Financial Crisis, Capital Outflows and Monetary Policy Responses: Simple Analytics with Reference to East Asia

Ramkishen Rajan

Chapter 5 in Exchange Rates, Currency Crisis and Monetary Cooperation in Asia, 2009, pp 110-133 from Palgrave Macmillan

Abstract: Abstract Financial crises seem to have become the norm rather than the exception since 1992.2 Specifically, in 1992–1993, Europe was faced with the very real possibility of a complete collapse of the European Exchange Rate Mechanism (ERM). The Italian lira and British pound withdrew from the ERM, three other currencies (the Spanish peseta, Irish pound and Danish krona) were devalued, and there was a substantial widening of the bands within which the currencies could fluctuate. In 1994–1995, the Mexican currency crisis, which saw a steep devaluation of the peso, brought Mexico to the brink of default. There were also spillover effects on Argentina and Brazil. Between July 1997 and mid-1998, the world experienced the effects of the East Asian crisis, which started somewhat innocuously with a run on the Thai baht, but spread swiftly to a number of other regional currencies, most notably the Indonesian rupiah, Malaysian ringgit and Korean won. Other large emerging economies such as Russia and Brazil also experienced periods of significant market weakness and required the assistance of the IMF. The Russian ruble was devalued in August 1998—during a period of exceptional financial market turbulence (Bank for International Settlements 1999)—and the Brazilian real’s peg was eventually broken in January 1999. A number of other smaller emerging economies such as Turkey and Ecuador also experienced currency crises in the 1990s; Argentina and Venezuela were the most recent victims.

Keywords: Exchange Rate; Monetary Policy; Money Demand; Monetary Authority; Capital Control (search for similar items in EconPapers)
Date: 2009
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-23419-2_5

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230234192

DOI: 10.1057/9780230234192_5

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().