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

Author

Listed:
  • Alessandro Zanello
  • Mark R. Stone
  • Christopher J. Jarvis
  • Andrew Berg

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.

Suggested Citation

  • Alessandro Zanello & Mark R. Stone & Christopher J. Jarvis & Andrew Berg, 2003. "Re-Establishing Credible Nominal Anchors After a Financial Crisis; A Review of Recent Experience," IMF Working Papers 03/76, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:03/76
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    References listed on IDEAS

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    Cited by:

    1. Douglas Laxton & Andrew Berg & Philippe D Karam, 2006. "A Practical Model-Based Approach to Monetary Policy Analysis—Overview," IMF Working Papers 06/80, International Monetary Fund.
    2. Eduardo Wiesner, 2008. "The Political Economy of Macroeconomic Policy Reform in Latin America," Books, Edward Elgar Publishing, number 12913, April.
    3. Siwei Goo & Reza Siregar, 2009. "Economic Shocks And Exchange Rate As A Shock Absorber In Indonesia And Thailand," Staff Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number sp72, April.

    More about this item

    Keywords

    Financial crisis; Monetary policy; nominal anchor; inflation; foreign exchange; central bank; inflation targeting; Studies of Particular Policy Episodes;

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