The Interest Rate-Exchange Rate Nexus in the Asian Crisis Countries

Author/Editor:

Atish R. Ghosh ; Gabriela Basurto

Publication Date:

January 1, 2000

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Sharp exchange rate depreciations in the East Asian crisis countries (Indonesia, Korea, and Thailand) raised doubts about the efficacy of increasing interest rates to defend the currency. Using a standard monetary model of exchange rate determination, this paper shows that tighter monetary policy was in fact associated with an appreciation of the exchange rate. Moreover, there is little evidence of higher real interest rates contributing to a widening of the risk premium.

Series:

Working Paper No. 00/19

Subject:

English

Publication Date:

January 1, 2000

ISBN/ISSN:

9781451843736/1018-5941

Stock No:

WPIEA0192000

Format:

Paper

Pages:

25

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