IMF Working Papers

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

By Taimur Baig, Ilan Goldfajn

December 1, 1998

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Taimur Baig, and Ilan Goldfajn. Monetary Policy in the Aftermath of Currency Crises: The Case of Asia, (USA: International Monetary Fund, 1998) accessed November 21, 2024
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 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.

Subject: Currencies, Exchange rates, Financial services, Foreign exchange, Inflation, Money, Prices, Real exchange rates, Real interest rates

Keywords: Asia and Pacific, Currencies, Currency, Exchange rate, Exchange rates, Expected return, Inflation, Interest rate, Interest rate change, Interest rate data, Interest rate differential, Interest rate increase, Interest rate note, Interest rates, Monetary policy, Nominal interest rate, Nominal rate, Overnight interest rate, Real exchange rates, Real interest rate, Real interest rates, WP

Publication Details

  • Pages:

    31

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1998/170

  • Stock No:

    WPIEA1701998

  • ISBN:

    9781451858396

  • ISSN:

    1018-5941

Notes

This paper is schedule to be presented at the University of Washington conference on the Asian crisis on December 29-30, 1998.

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