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Exchange Rate Stability and Financial Stability Author info | Abstract | Publisher info | Download info | Related research | Statistics Barry Eichengreen ()
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Historical evidence reveals no monocausal explanation for banking crises, including one which would emphasize the maintenance of a currency peg. To some extent this follows from the standard textbook wisdom: whether fixed or flexible exchange rates are preferable depends on the source of disturbances. If threats to the stability of the banking system come from the “outside,†there is a case for exchange rate flexibility to discourage the banks from relying excessively on external sources of finance and to enhance the capacity of the domestic authorities to act as lenders of last resort. Conversely, if the main threats to the stability of the banking system emanate from “inside†(e.g., erratic monetary policies at home), there is an argument for attempting to peg the exchange rate in order to discipline domestic policymakers and vent shocks via the external sector. From this point of view, it is no surprise that there is no simple correlation between the exchange rate regime and the prevalence of banking crises. Copyright Kluwer Academic Publishers 1998
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Article provided by Springer in its journal Open Economies Review .
Volume (Year): 9 (1998)
Issue (Month): 1 (January)
Pages: 569-608
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Handle: RePEc:kap:openec:v:9:y:1998:i:1:p:569-608Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100323
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Keywords: exchange-rate regime ; banking crisis ; financial stability ; lender of last resort ; Other versions of this item:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Caprio, Gerard Jr. & Dooley, Michael & Leipziger, Danny & Walsh, Carl, 1996.
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Domac, Ilker & Martinez-Peria, Maria Soledad, 2000.
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Open Economies Review ,
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Koichi Hamada, 1998.
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Gerardo della Paolera & Alan Taylor, 1999.
"Internal Versus External Convertibility and Developing-Country Financial Crises: Lessons from the Argentine Bank Bailout of the 1930s ,"
Center for International and Development Economics Research, Working Paper Series
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Other versions: Alberto Predieri, 1998.
"Money Markets and Poliarchic Democratic States ,"
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Alicia García Herrero & Pedro del Río, 2003.
"Financial stability and the design of monetary policy ,"
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0315, Banco de España.
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Forrest Capie, 1998.
"Monetary Unions in Historical Perspective: What Future for the Euro in the International Financial System ,"
Open Economies Review ,
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deabes, Tosson, 2003.
"يفيةتقليل مخا طر البنو [How to Reduce the Risk Of Banking Problems] ,"
MPRA Paper
3054, University Library of Munich, Germany, revised Nov 2003.
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Honohan, Patrick & Lane, Philip R., 2000.
"Will the Euro trigger more monetary unions in Africa? ,"
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Other versions: Barry Eichengreen & Andrew K. Rose, 1998.
"Staying Afloat When the Wind Shifts: External Factors and Emerging-Market Banking Crises ,"
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Other versions: Paolo Savona & Aurelio Maccario, 1998.
"On the Relation between Money and Derivatives and its Application to the International Monetary Market ,"
Open Economies Review ,
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Gerardo della Paolera & Alan M. Taylor, 2000.
"Internal Versus External Convertibility and Developing-Country Financial ,"
Macroeconomics
0004002, EconWPA.
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