IMF Working Papers

The Game of Anchors: Studying the Causes of Currency Crises in Belarus

ByAlex Miksjuk, Sam Ouliaris, Mikhail Pranovich

December 29, 2015

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Alex Miksjuk, Sam Ouliaris, and Mikhail Pranovich. "The Game of Anchors: Studying the Causes of Currency Crises in Belarus", IMF Working Papers 2015, 281 (2015), accessed 11/11/2025, https://doi.org/10.5089/9781498342728.001

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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

Belarus experienced a sequence of currency crises during 2009-2014. Our empirical results, based on a structural econometric model, suggest that the activist wage policy and extensive state program lending (SPL) conflicted with the tightly managed exchange rate regime and suppressed monetary policy transmission. This created conditions for the unusually frequent crises. At the current juncture, refocusing monetary policy from exchange rate to inflation would help to avoid disorderly external adjustments. The government should abandon wage targets and phase out SPL to remove the underlying source of the imbalances and ensure lasting stabilization.

Subject: Exchange rates, Foreign exchange, Inflation, Labor, Monetary base, Money, Prices, Wage policy, Wages

Keywords: A. monetary policy transmission, B. monetary policy transmission, currency crisis, D. monetary policy regime, exchange rate, exchange rate objective, exchange rate policies, Exchange rates, fiscal policy, Inflation, inflation expectation, inflation high, interest rate, interest rate channel, long run monetary policy neutrality, long-run monetary policy neutrality, Monetary base, monetary policy, monetary policy transmission channels, monetary policy transmission mechanism, money stock, transmission mechanism, Wage policy, Wages, WP

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