Exchange market pressure (EMP), the sum of exchange rate depreciation and reserve outflows (scaled by base money), summarizes the flow excess supply of money in a managed exchange rate regime. This paper examines Brazil, Chile, Mexico, Indonesia, Korea, and Thailand, and finds that monetary policy affects EMP as generally expected: contractionary monetary policy helps to reduce EMP. The monetary policy stance is best measured by domestic credit growth (since interest rates contain both policy- and market-determined elements). In response to higher EMP, monetary authorities boosted domestic credit growth both in Mexico (confirming previous research) and in the Asian countries. Copyright 2001, International Monetary Fund
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Article provided by Palgrave Macmillan Journals in its journal IMF Staff Papers.
Find related papers by JEL classification: E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates F3 - International Economics - - International Finance F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
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