Monetary Policy in the Aftermath of Currency Crises: The Case of Asia

Taimur Baig and Ilan Goldfajn

No 1998/170, IMF Working Papers from International Monetary Fund

Abstract: This paper evaluates monetary policy and its relationship with the exchange rate in five Asian crisis countries. The findings are compared with previous currency crises in recent history. The paper finds no evidence of overly tight monetary policy in the Asian crisis countries in 1997 and early 1998, nor evidence that high interest rates led to weaker exchange rates. The usual trade-off between inflation and output when raising interest rates suggested the need for a softer monetary policy in the crisis countries to combat recession. However, in some countries, corporate balance sheet considerations called for the reversal of overly depreciated currencies through firmer monetary policy.

Keywords: WP; interest rate; exchange rate; nominal interest rate; real interest rate; currency; monetary policy; interest rates; inflation; interest rate differential; nominal rate; expected return; interest rate note; interest rate data; overnight interest rate; interest rate increase; interest rate change; Exchange rates; Real interest rates; Currencies; Real exchange rates; Asia and Pacific (search for similar items in EconPapers)
Pages: 31
Date: 1998-12-01
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Citations: View citations in EconPapers (51)

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Related works:
Journal Article: Monetary Policy in the Aftermath of Currency Crises: The Case of Asia (2002)
Working Paper: Monetary policy in the aftermath of currency crisis: the case of Asia (1999)
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