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Crise de change et politique monétaire optimale dans un modèle de troisième génération : le rôle de la prime de risque

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  • Vincent Bouvatier

    ()
    (TEAM)

Abstract

This article relates to the choice of the optimal monetary policy during a currency crisis. Aghion, Bacchetta and Banerjee (1999, 2000, 2001) show that a restrictive monetary policy is optimal if economy is strongly in debt in foreign currency and if the effect of credit channel is weak. However, this result is obtained with an assumption of perfect substituability of assets - the risk premium is equal to zero. The introduction of a risk premium in the theoretical model can be justified with an econometric approach for Thailand and to a lesser extent for South Korea. The efficiency of the monetary policy during a currency crisis is reduced when the risk premium plays an important part in the determination of the interest rate differential. Under these conditions, capital controls could be a more adequate policy to manage a currency crisis.

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Bibliographic Info

Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number bla04089.

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Length: 28 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:mse:wpsorb:bla04089

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Related research

Keywords: Monetary policy; currency crisis; risk premium.;

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References

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  1. Reinhart, Carmen & Edison, Hali, 2001. "Capital controls during financial crises: The case of Malaysia and Thailand," MPRA Paper 13903, University Library of Munich, Germany.
  2. Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc.
  3. Ronald McKinnon & Gunther Schnabl, 2003. "The East Asian Dollar Standard, Fear of Floating, and Original Sin," Working Papers 03001, Stanford University, Department of Economics.
  4. Michael P. Dooley, 1998. "A model of crises in emerging markets," International Finance Discussion Papers 630, Board of Governors of the Federal Reserve System (U.S.).
  5. Paul Fenton & Alain Paquet, 1997. "Politiques économiques et intégration des marchés financiers: que pouvons-nous apprendre des différentiels de taux d'intérêt?," Cahiers de recherche CREFE / CREFE Working Papers 52, CREFE, Université du Québec à Montréal.
  6. Banerjee, Abhijit & Bacchetta, Philippe & Aghion, Philippe, 2001. "Currency Crises and Monetary Policy in an Economy with Credit Constraints," Scholarly Articles 4554218, Harvard University Department of Economics.
  7. Aghion, Philippe & Bacchetta, Philippe & Banerjee, Abhijit, 2004. "A corporate balance-sheet approach to currency crises," Journal of Economic Theory, Elsevier, vol. 119(1), pages 6-30, November.
  8. Sebastian Edwards, 1999. "How Effective Are Capital Controls?," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 65-84, Fall.
  9. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
  10. Leonardo Hernández & Peter Montiel, 2001. "Post-Crisis Exchange Rate Policy in Five Asian Countries: Filling in the "Hollow Middle"?," Center for Development Economics 167, Department of Economics, Williams College.
  11. Philippe Bacchetta, 2000. "Monetary Policy with Foreign Currency Debt," Working Papers 00.03, Swiss National Bank, Study Center Gerzensee.
  12. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
  13. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  14. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
  15. Philippe Aghion & Abhijit Banerjee & Thomas Piketty, 1999. "Dualism And Macroeconomic Volatility," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1359-1397, November.
  16. Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 1-136.
  17. Paul Fenton & Alain Paquet, 1997. "International Interest Rate Differentials: The Interaction with Fiscal and Monetary Variables, and the Business Cycle," Cahiers de recherche CREFE / CREFE Working Papers 56, CREFE, Université du Québec à Montréal, revised Jan 1998.
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Cited by:
  1. U. Michael Bergman & Shakill Hassan, 2008. "Currency Crises and Monetary Policy in an Economy with Credit Constraints: The No Interest Parity Case," EPRU Working Paper Series 08-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.

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