Monetary Independence in Emerging Markets: Does the Exchange Rate Regime Make a Difference?

Author/Editor:

Thomas Philippon ; Jeromin Zettelmeyer ; Eduardo Borensztein

Publication Date:

January 1, 2001

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper compares the impact of shocks to U.S. interest rates and emerging market bond spreads on domestic interest rates and exchange rates across several emerging market economies with different exchange rate regimes. Consistent with conventional priors, the results indicate that interest rates in Hong Kong react much more to U.S. interest rate shocks and shocks to international risk premia than interest rates in Singapore. The results are less clearcut in the comparison of Argentina and Mexico: While interest rates (and the exchange rate) in Mexico seem to react less to U.S. interest rate shocks, they react about the same to bond spread shocks, in addition to a significant impact on the exchange rate.

Series:

Working Paper No. 2001/001

Subject:

Emerging and frontier financial markets Exchange rate arrangements Exchange rates Financial markets Financial regulation and supervision Floating exchange rates Foreign exchange Market risk

English

Publication Date:

January 1, 2001

ISBN/ISSN:

9781451841633/1018-5941

Stock No:

WPIEA0012001

Pages:

49

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