Currency Crises and Macroeconomic Performance
AbstractThis paper presents some theory and evidence on the implications of sudden currency depreciations for output and inflation. It identifies some of the characteristics shared by countries which have suffered falling output in the aftermath of a currency crisis, and it presents a small model which rationalises aspects of this common experience. The model is then used to derive the optimal monetary policy response to a crisis. A key result is that a currency crisis which coincides with a banking crisis is more likely to depress output and may call for an accommodating monetary policy.
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Bibliographic InfoPaper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp2002-08.
Date of creation: Nov 2002
Date of revision:
Find related papers by JEL classification:
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- F3 - International Economics - - International Finance
This paper has been announced in the following NEP Reports:
- NEP-AFR-2003-03-10 (Africa)
- NEP-ALL-2003-03-10 (All new papers)
- NEP-CBA-2003-03-10 (Central Banking)
- NEP-FIN-2003-03-10 (Finance)
- NEP-IFN-2003-03-10 (International Finance)
- NEP-MAC-2003-03-10 (Macroeconomics)
- NEP-RMG-2003-03-10 (Risk Management)
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