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Re-Establishing Credible Nominal Anchors After a Financial Crisis: A Review of Recent Experience

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Author Info
Christopher J. Jarvis
Mark R. Stone
Alessandro Zanello
Andrew Berg

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Abstract

This paper studies the question of how to achieve monetary policy credibility and price stability after a financial crisis. We draw stylized facts and conclusions from ten recent cases: Brazil (1999); Bulgaria (1997); Ecuador (2000); Indonesia (1997); Korea (1997); Malaysia (1997); Mexico (1994), Russia (1998); Thailand (1997); and Turkey (2001). Among our conclusions, highlights include: (i) monetary policy alone cannot stabilize; (ii) floats bring nominal stability quickly in countries with low pre-crisis inflation and hard pegs have been at least narrowly successful for countries in deeper disarray; (iii) in floats, early and determined tightening brings nominal stability and does not appear more costly for output; (iv) monetary aggregate targeting rarely serves as a coherent framework for floats; informal or full-fledged inflation targeting offers more promise.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/76.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 44 pages
Date of creation: 28 Apr 2003
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Handle: RePEc:imf:imfwpa:03/76

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Related research
Keywords: Financial crisis ; Monetary policy ; Floating exchange rates ; Exchange rate regimes ;

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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.:
  1. Charles Enoch & Anne Marie Gulde & Carl-Johan Lindgren & Marc Quintyn & Leslie Teo & Tomás J. T. Baliño, 2000. "Financial Sector Crisis and Restructuring:Lessons from Asia," IMF Occasional Papers 188, International Monetary Fund. [Downloadable!]
  2. Paul R. Masson, 1997. "The Scope for Inflation Targeting in Developing Countries," IMF Working Papers 97/130, International Monetary Fund.
  3. Ilan Goldfajn & Poonam Gupta, 1999. "Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis?," IMF Working Papers 99/42, International Monetary Fund.
    Other versions:
  4. Lawrence J. Christiano & Christopher Gust & Jorge Roldos, 2002. "Monetary policy in a financial crisis," Working Paper 0204, Federal Reserve Bank of Cleveland. [Downloadable!]
    Other versions:
  5. Aleš Bulir & Atish R. Ghosh & A. Javier Hamann & Timothy D. Lane & Alex Mourmouras & Steven Phillips & Marianne Schulze-Gattas & Jack Boorman, 2000. "Managing Financial Crises - The Experience in East Asia," IMF Working Papers 00/107, International Monetary Fund.
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  6. Richard Hemming & Michael Kell & Axel Schimmelpfennig, 2003. "Fiscal Vulnerability and Financial Crises in Emerging Market Economies," IMF Occasional Papers 218, International Monetary Fund.
  7. Atish R. Ghosh & A. Javier Hamann & Timothy D. Lane & Steven Phillips & Marianne Schulze-Gattas & T. M. Tsikata, 1999. "IMF-Supported Programs in Indonesia, Korea and Thailand," IMF Occasional Papers 178, International Monetary Fund. [Downloadable!]
  8. Charles Enoch & Anne Marie Gulde & Daniel C. L. Hardy, 2002. "Banking Crises and Bank Resolution: Experiences in Some Transition Economies," IMF Working Papers 02/56, International Monetary Fund. [Downloadable!]
  9. Yougesh Khatri & Il Houng Lee & O. Liu & Kanitta Meesook & Natalia T. Tamirisa, 2001. "Malaysia: From Crisis to Recovery," IMF Occasional Papers 207, International Monetary Fund.
  10. Honohan, Patrick & Shi, Anging, 2001. "Deposit dollarization and the financial sector in emerging economies," Policy Research Working Paper Series 2748, The World Bank. [Downloadable!]
  11. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 1-48, February. [Downloadable!] (restricted)
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  12. Alina Carare & Andrea Schaechter & Mark R. Stone & Marc Zelmer, 2002. "Establishing Initial Conditions in Support of Inflation Targeting," IMF Working Papers 02/102, International Monetary Fund. [Downloadable!]
  13. Ales Bulir & Atish R. Ghosh & A. Javier Hamann & Timothy D. Lane & Alex Mourmouras & Marianne Schulze-Gattas, 2002. "IMF-Supported Programs in Capital Account Crises: Design and Experience," IMF Occasional Papers 210, International Monetary Fund.
  14. Dalia Hakura & Ehsan U. Choudhri, 2001. "Exchange Rate Pass-Through to Domestic Prices: Does the Inflationary Environment Matter?," IMF Working Papers 01/194, International Monetary Fund. [Downloadable!]
    Other versions:
Full references

Cited by:
(explanations, 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.)

  1. Philippe D Karam & Douglas Laxton & Andrew Berg, 2006. "A Practical Model-Based Approach to Monetary Policy Analysis--Overview," IMF Working Papers 06/80, International Monetary Fund. [Downloadable!]
  2. Goo, Siwei & Siregar, Reza Y. Siregar, 2009. "Economic Shocks and Exchange Rate as a Shock Absorber in Indonesia and Thailand," MPRA Paper 16875, University Library of Munich, Germany. [Downloadable!]
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