IDEAS home Printed from https://ideas.repec.org/a/fip/fedfer/y1999p23-41n1.html
   My bibliography  Save this article

Did a boom in money and credit precede east Asia's recent currency crisis?

Author

Listed:
  • Ramon Moreno

Abstract

This paper assesses the relationship between money and credit and episodes of sharp depreciation in East Asia by: (i) examining the growth rates of money and credit variables around depreciation episodes; (ii) estimating the impact of money and credit variables on the probability of a sharp depreciation episode using logit models; (iii) evaluating the signals contained in money and credit variables prior to episodes of sharp currency depreciation. ; Reserve money grew rapidly prior to the 1997 currency crisis in East Asia. However, signs of a money or credit boom based on other indicators were mixed. The 1997 episodes differ from East Asia's past experience in a number of ways. Rapid growth in the M2 multiplier and in the ratio of M2 to foreign reserves, positive deviations of reserve money from trend, and declines or sluggish growth in reserve money and in foreign reserves, helped predict episodes of sharp depreciation up to mid-1996. While some of these indicators pointed to the possibility of a crisis in some of the countries prior to the 1997 episodes, they did not consistently predict the sharp depreciations that occurred.

Suggested Citation

  • Ramon Moreno, 1999. "Did a boom in money and credit precede east Asia's recent currency crisis?," Economic Review, Federal Reserve Bank of San Francisco, pages 23-41.
  • Handle: RePEc:fip:fedfer:y:1999:p:23-41:n:1
    as

    Download full text from publisher

    File URL: http://www.frbsf.org/econrsrch/econrev/99-1/23-41.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Michael Gavin & Ricardo Hausmann, 1996. "The Roots of Banking Crises: The Macroeconomic Context," Research Department Publications 4026, Inter-American Development Bank, Research Department.
    2. repec:idb:wpaper:318 is not listed on IDEAS
    3. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency Crashes in Emerging Markets: Empirical Indicators," Center for International and Development Economics Research (CIDER) Working Papers 233424, University of California-Berkeley, Department of Economics.
    4. Ramon Moreno, 1995. "Macroeconomic behavior during periods of speculative pressure or realignment: evidence from Pacific Basin economies," Economic Review, Federal Reserve Bank of San Francisco, pages 3-16.
    5. Calvo, Guillermo A. & Mendoza, Enrique G., 1996. "Mexico's balance-of-payments crisis: a chronicle of a death foretold," Journal of International Economics, Elsevier, vol. 41(3-4), pages 235-264, November.
    6. Michael Gavin & Ricardo Hausmann, 1996. "The Roots of Banking Crises: The Macroeconomic Context," IDB Publications (Working Papers) 6067, Inter-American Development Bank.
    7. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    8. Glick, R. & Moreno, R., 1999. "Money and Credit, Competitiveness, and Currency Crises in Asia and Latin America," Papers 99-01, Economisch Institut voor het Midden en Kleinbedrijf-.
    9. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    10. Michael Gavin & Ricardo Hausmann, 1996. "The Roots of Banking Crises: The Macroeconomic Context," Research Department Publications 4026, Inter-American Development Bank, Research Department.
    11. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
    12. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    East Asia ; Money;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedfer:y:1999:p:23-41:n:1. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Federal Reserve Bank of San Francisco Research Library). General contact details of provider: http://edirc.repec.org/data/frbsfus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.