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Monetary Impact of a Banking Crisis and the Conduct of Monetary Policy

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  • Alicia García-Herrero

Abstract

The experiences of seven countries that have undergone banking crises show that crises have significant implications for the short-run stability of the demand for money, the money multiplier, the transmission mechanism, and the signal variables of monetary policy. Monetary and credit instability, coupled with changes in the nature of the monetary and credit aggregates, complicate monetary management. These findings may require redesigning monetary instruments in favor of faster-reacting instruments, such as open market operations, and introducing additional indicators of the monetary stance, such as asset price and exchange rate movements. More frequent reviews of monetary programs may also be necessary.

Suggested Citation

  • Alicia García-Herrero, 1997. "Monetary Impact of a Banking Crisis and the Conduct of Monetary Policy," IMF Working Papers 97/124, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:97/124
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    Cited by:

    1. Russell Wong & Cathy Zhang & Guillaume Rocheteau, 2017. "Lending Relationships, Banking Crises and Optimal Monetary Policies," 2017 Meeting Papers 152, Society for Economic Dynamics.
    2. Burton A. Abrams & Russell F. Settle, 2007. "Do Fixed Exchange Rates Fetter Monetary Policy? A Credit View," Eastern Economic Journal, Eastern Economic Association, vol. 33(2), pages 193-205, Spring.
    3. Nacer Bernou & Mustapha Sadni Jallab, 2002. "Le commerce des services financiers dans le monde : un état des lieux," Post-Print halshs-00178172, HAL.
    4. Maria Soledad Martinez Peria, 2002. "The Impact of Banking Crises on Money Demand and Price Stability," IMF Staff Papers, Palgrave Macmillan, vol. 49(3), pages 1-1.
    5. Ljubinko Jankov, 2000. "Banking Sector Problems: Causes, resolutions and consequences," Occasional paper series 10, Institute of Public Finance.
    6. Alicia García Herrero & Pedro del Río, 2003. "Financial stability and the design of monetary policy," Working Papers 0315, Banco de España;Working Papers Homepage.
    7. repec:spi:joabfr:2018:p:34-54 is not listed on IDEAS
    8. Giesecke, Kay & Longstaff, Francis A. & Schaefer, Stephen & Strebulaev, Ilya A., 2014. "Macroeconomic effects of corporate default crisis: A long-term perspective," Journal of Financial Economics, Elsevier, vol. 111(2), pages 297-310.
    9. International Monetary Fund, 2002. "Lithuania; History and Future of the Currency Board Arrangement," IMF Working Papers 02/127, International Monetary Fund.

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