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33
Contagious Currency Crises
, 1997
"... Speculative attacks tend to be temporally correlated; that is, currency crises appear to pass "contagiously" from one country to another. The paper provides a survey of the theoretical literature and analyzes the contagious nature of currency crises empirically. Using thirty years of pane ..."
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Cited by 64 (1 self)
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Speculative attacks tend to be temporally correlated; that is, currency crises appear to pass "contagiously" from one country to another. The paper provides a survey of the theoretical literature and analyzes the contagious nature of currency crises empirically. Using thirty years of panel data from twenty industrialized countries, we find evidence of contagion. Contagion appears to spread more easily to countries which are closely tied by international trade linkages than to countries in similar macroeconomic circumstances. Keywords: speculative; channels; international; trade; macroeconomic; similarity; panel; data. JEL Classification Number: F31. Barry Eichengreen, Andrew K. Rose, Charles Wyplosz Economics Department Haas School of Business GIIS University of California University of California Geneva 11A, Ave. de la Paix Berkeley, CA USA 94720-3880 Berkeley, CA USA 94720-1900 CH-1202 Geneva, Switzerland Tel: +1 (510) 642-8084 Tel: +1 (510) 642-6609 Tel: +41 (22) 734-3644 Fax: +1 (...
Noise Trading And Exchange Rate Regimes
- Quarterly Journal of Economics
, 2002
"... and especially Robert Flood (with whom we are engaged in ongoing related research) and RichLyons for comments, discussion, and encouragement. A current version of this paper and the STATA data set used to generate the graphics are available at ..."
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Cited by 29 (0 self)
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and especially Robert Flood (with whom we are engaged in ongoing related research) and RichLyons for comments, discussion, and encouragement. A current version of this paper and the STATA data set used to generate the graphics are available at
Exchange Rate Regimes, Inflation and Output Volatility in Developing Countries
"... The median developing country has had significantly higher inflation than the median advanced country since the early 1980s. A model is presented in which a developing country may reduce inflationary expectations by pegging its exchange rate to the currency of an advanced country (or a basket of suc ..."
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Cited by 20 (6 self)
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The median developing country has had significantly higher inflation than the median advanced country since the early 1980s. A model is presented in which a developing country may reduce inflationary expectations by pegging its exchange rate to the currency of an advanced country (or a basket of such currencies), at the expense of forgoing its ability to compensate for real exchange rate shocks. Different types of pegged exchange rate offer varying degrees of anti-inflation credibility and of exposure to shocks. Tests on a sample of 80 developing countries support the empirical predictions of the model. Outline 1. Introduction 2. The Model 3. Empirical Findings 4. Conclusions 1 I INTRODUCTION Much has been written about inflation in developing countries over the past twenty years, almost all of it in connection with stabilising high inflations which have afflicted only a minority of countries. There has been virtually no discussion of the divergence between the inflationary expe...
Would International Currency Taxation help Stabilise Exchange Rates and Avoid Currency Crises
- in Developing Countries?”, CIES Discussion Paper No.99/13, Centre for International Economic Studies
, 1999
"... Completely flexible exchange rates may be “excessively ” volatile, with the implied currency misalignments leading to real inefficiencies in resource allocation and detrimental effects on economic growth. This paper analyses whether international currency taxation would be effective in calming excha ..."
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Cited by 13 (6 self)
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Completely flexible exchange rates may be “excessively ” volatile, with the implied currency misalignments leading to real inefficiencies in resource allocation and detrimental effects on economic growth. This paper analyses whether international currency taxation would be effective in calming exchange rate volatility and avoiding currency crises within the context of a simple model of exchange rate determination. It is found that the effects of a tax on foreign exchange volatility depend on the nature of speculation and whether the focus is on capital inflows or outflows. Key words: foreign exchange, IMF, capital flows, Tobin tax, volatility
The 1987 Mexican Disinflation Program: An Exchange-Rate-Based Stabilization?" IMF Working Paper no
, 1996
"... Abstract: We examine whether Mexico's disinflation experience during 1987-94 fits the widely accepted set of stylized facts of exchange-ratebased stabilization (ERBS) on inflation, the boom-recession business cycle, and the external sector. A cursory look at Mexican data shows that the experie ..."
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Cited by 10 (1 self)
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Abstract: We examine whether Mexico's disinflation experience during 1987-94 fits the widely accepted set of stylized facts of exchange-ratebased stabilization (ERBS) on inflation, the boom-recession business cycle, and the external sector. A cursory look at Mexican data shows that the experience fits quite closely the stylized facts of ERBS. However, the paper shows that there were some important differences and peculiarities of the Mexican case that deserve further study, especially regarding the role of the nominal anchor and the nature of the business cycle. Keywords: stabilization, disinflation, business cycle, nominal anchor. Resumen: Se examina si la experiencia desinflacionaria de México durante el periodo 1987-1994 es compatible con los hechos estilizados de expansión económica y de evolución del sector externo asociados a las estabilizaciones inflacionarias basadas en el tipo de cambio (ERBS, por sus siglas en inglés). Una rápida revisión de los datos muestra que la experiencia mexicana es bastante congruente con dichos hechos estilizados. Sin embargo, este documento muestra que existen algunas diferencias importantes, así como peculiaridades del caso mexicano que merecen un estudio más detallado. Específicamente, aquéllas que tienen que ver con el papel del ancla nominal y la naturaleza del ciclo económico.
Reflections on the South African rand crisis of 1996 and policy consequences. Centre for the Study of African Economies Working Paper Series No. 97
, 1999
"... Abstract: After South Africa's democratic elections in 1994, large capital inflows were induced by the cessation of trade and financial sanctions, improved creditworthiness and a liberalised capital account for foreigners. The flows were managed in a classic trade-off between currency stability ..."
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Cited by 9 (5 self)
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Abstract: After South Africa's democratic elections in 1994, large capital inflows were induced by the cessation of trade and financial sanctions, improved creditworthiness and a liberalised capital account for foreigners. The flows were managed in a classic trade-off between currency stability, and raised interest rates to counter inflation resulting from a credit boom and partially sterilised intervention. In early 1996, the currency suffered a speculative attack. Using a theoretical model of currency crises, we present some empirical results suggesting the importance of economic fundamentals and policy credibility as determinants of investors ' devaluation expectations prior to the crisis. Poor growth associated with subsequent protracted currency volatility and high interest rates argues for a range of complementary policies to manage inflows in South Africa. These include reserve requirements on certain inflows, prudent further liberalisation of domestic exchange controls, improved private and government savings policies, a medium-term public debt framework and closer monitoring of risk management by banking and other financial institutions.
Managing Volatile Capital Inflows: The Experience of the 1990s
, 1996
"... The paper aims at deriving lessons for macroeconomic policy in developing countries in response to heavy temporary capital inflows as witnessed in the early 1990s. First, after spelling out the major reasons why policymakers should be concerned about cyclical inflows, the volatility of different cap ..."
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Cited by 2 (0 self)
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The paper aims at deriving lessons for macroeconomic policy in developing countries in response to heavy temporary capital inflows as witnessed in the early 1990s. First, after spelling out the major reasons why policymakers should be concerned about cyclical inflows, the volatility of different capital-account items {bank lending, foreign direct investment, and portfolio flows} is assessed. Second, the recent capital flows are compared between Asia and Latin America for similarities and differences. Third, the paper discusses for 13 heavy capital importers in Asia and Latin America the extent to which they met the prerequisites postulated by the sequencing literature to avoid macroeconomic complications of heavy capital inflows, and how they used these external savings in light of the debt cycle theory. Finally, the paper draws five policy lessons for the next episode of heavy capital inflows: identify the origin of rising foreign exchange reserves; identify the limits of foreign debt; discourage above-limit, short-term inflows; observe the tradeoff between price stability and competitiveness; and design policies to target monetary aggregates and exchange rates, including fiscal policy, sterilized intervention, reserve requirements, and exchange rate management.
INFLATION TARGETING IN LATIN AMERICA
"... This paper analyzes Latin America’s recent experience with the use of inflation targeting (IT) while the region has made substantial progress toward eradicating high inflation. The paper assesses the implementation and results of inflation targeting in Latin America from a broad perspective. It star ..."
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This paper analyzes Latin America’s recent experience with the use of inflation targeting (IT) while the region has made substantial progress toward eradicating high inflation. The paper assesses the implementation and results of inflation targeting in Latin America from a broad perspective. It starts by reviewing the issues relevant for the choice of exchange-rate regimes and monetary frameworks, documenting the evolution of exchange rate and monetary regimes in Latin America during the last two decades. Then it describes the Latin American and world samples of inflation targeters and compares their performance to non-targeters, focusing on their success in meeting inflation targets, their output sacrifice in achieving low inflation, and their output volatility.
Citizens and Policymakers ∗
"... We investigate the effectiveness of an aggressive price stabilizing (antiinflation) policy on the ability of citizens to achieve rational expectations equilibrium (REE) forecasts of inflation. Inflation does not persist when citizens have rational expectations forecasts. In using policy to assist ci ..."
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We investigate the effectiveness of an aggressive price stabilizing (antiinflation) policy on the ability of citizens to achieve rational expectations equilibrium (REE) forecasts of inflation. Inflation does not persist when citizens have rational expectations forecasts. In using policy to assist citizens in achieving REE forecasts, policymakers also reduce inflation persistence. An aggressive anti-inflation policy tack consists of (among other things) a willingness to respond more forcefully to deviations from an inflation target. Using an adaptive learning framework, we develop a model that uses a real contracting rigidity in conjunction with an interest rate rule and an IS-curve. The model equilibrium indicates that only an aggressive anti-inflation policy enables citizens to learn the REE inflation forecast. The model also shows that inflation persistence has a negative relationship with policy aggressiveness. We test the model using quarterly inflation data for the period 1960 to 2000. The results indicate that policy becomes aggressive in the early 1980s. A substantial reduction in inflation persistence follows this change in policy.
Inflation persistence and exchange rate regimes: evidence from developing countries
"... Using data for 102 developing countries, it is shown that inflation persistence is particularly low in countries on hard pegs, and particularly high in countries with severe inflationary problems. Inflation persistence is similar under floating and soft pegs. The finding of low inflation persistence ..."
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Using data for 102 developing countries, it is shown that inflation persistence is particularly low in countries on hard pegs, and particularly high in countries with severe inflationary problems. Inflation persistence is similar under floating and soft pegs. The finding of low inflation persistence in hard pegs is a new result.
