Exchange Market Pressure, Currency Crises, and Monetary Policy: Additional Evidence From Emerging Markets

Evan Tanner ()

No 2002/014, IMF Working Papers from International Monetary Fund

Abstract: This paper extends my previous work by examining the relationship between monetary policy and exchange market pressure (EMP) in 32 emerging market countries. EMP is a gauge of the severity of crises, and part of this paper specifically analyzes crisis periods. Two variables gauge the stance of monetary policy: the growth of central bank domestic credit and the interest differential (domestic versus U.S. dollar). Evidence suggests that monetary policy plays an important role in currency crises. And, in most countries the shocks to monetary policy affect EMP in the direction predicted by traditional approaches: tighter money reduces EMP.

Keywords: WP; central bank; money demand; EMP shock; monetary aggregate; nominal exchange rate; currency crisis; monetary policy; exchange market pressure; domestic credit; exchange rate; reserves; vector autoregression; Brazil window; EMP fall; reaction function; exchange rate crisis; EMP help; monetary policy decision; monetary policy matter; place EMP; monetary policy stance; policy instrument; Currency markets; Monetary base; Exchange rate arrangements; Asia and Pacific; Western Hemisphere (search for similar items in EconPapers)
Pages: 54
Date: 2002-01-01
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Citations: View citations in EconPapers (45)

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