{
  "title": "Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis?",
  "publication": "IMF Working Papers, March 1, 1999",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/does-monetary-policy-stabilize-the-exchange-rate-following-a-currency-crisis-2932",
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  "summary": "This paper provides evidence on the relationship between monetary policy and the exchange rate in the aftermath of currency crises. It analyzes a large data set of currency crises in 80 countries for the period 1980-98.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Paper analyzes the relationship between monetary policy and the exchange rate in the aftermath of currency crises.\n- Dataset covers currency crises in 80 countries for the period 1980-98.\n- Central question: Can monetary policy increase the probability of reversing a postcrisis undervaluation through nominal appreciation rather than higher inflation?\n- Main finding: Tight monetary policy facilitates the reversal of currency undervaluation through nominal appreciation.\n- Conditional finding: When the economy also faces a banking crisis, results are not robust; depending on the specification, tight monetary policies may not have the same effect."
    },
    {
      "heading": "Major Findings and Conclusions",
      "content": "- Tight monetary policy is associated with a higher probability that postcrisis undervaluation is reversed via nominal appreciation rather than via higher inflation.\n- The presence of a contemporaneous banking crisis alters robustness: tight monetary policy may not reliably produce the same exchange rate reversal outcome across specifications."
    },
    {
      "heading": "Data, Scope, and Methods (as described)",
      "content": "- Sample: currency crises in 80 countries.\n- Time period: 1980-98.\n- Paper length: 32 pages.\n- Publication date: March 1, 1999.\n- Series and identifiers:\n  - Series: Working Paper No. 1999/042\n  - Volume: 1999\n  - Issue: 042\n  - Stock No: WPIEA0421999\n  - DOI: https://doi.org/10.5089/9781451846195.001\n  - ISBN: 9781451846195\n  - ISSN: 1018-5941"
    },
    {
      "heading": "Policy Implications and Considerations",
      "content": "- Tight monetary policy can be an effective tool to stabilize the exchange rate after a currency crisis by promoting nominal appreciation rather than fueling inflation.\n- Policymakers should exercise caution when banking sector problems coexist with a currency crisis, as the effectiveness of monetary tightening on exchange rate stabilization may be weakened or specification-dependent.\n\nSource: IMF Working Paper — “Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis?” by Ilan Goldfajn and Poonam Gupta, March 1, 1999.\n\n---\n\n Content in this bundle\n\n- Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis? - WP/99/42\n  - Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis? - WP/99/42 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis? - WP/99/42 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/does-monetary-policy-stabilize-the-exchange-rate-following-a-currency-crisis-2932"
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    "Authors: Ilan Goldfajn, Poonam Gupta",
    "Published: March 1, 1999",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451846195.001",
    "Paper analyzes the relationship between monetary policy and the exchange rate in the aftermath of currency crises.",
    "Dataset covers currency crises in 80 countries for the period 1980-98.",
    "Central question: Can monetary policy increase the probability of reversing a postcrisis undervaluation through nominal appreciation rather than higher inflation?",
    "Main finding: Tight monetary policy facilitates the reversal of currency undervaluation through nominal appreciation.",
    "Conditional finding: When the economy also faces a banking crisis, results are not robust; depending on the specification, tight monetary policies may not have the same effect.",
    "Tight monetary policy is associated with a higher probability that postcrisis undervaluation is reversed via nominal appreciation rather than via higher inflation.",
    "The presence of a contemporaneous banking crisis alters robustness: tight monetary policy may not reliably produce the same exchange rate reversal outcome across specifications.",
    "Sample: currency crises in 80 countries.",
    "Time period: 1980-98.",
    "Paper length: 32 pages.",
    "Publication date: March 1, 1999.",
    "Series and identifiers:",
    "Tight monetary policy can be an effective tool to stabilize the exchange rate after a currency crisis by promoting nominal appreciation rather than fueling inflation.",
    "Policymakers should exercise caution when banking sector problems coexist with a currency crisis, as the effectiveness of monetary tightening on exchange rate stabilization may be weakened or specification-dependent.",
    "**Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis? - WP/99/42**"
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