Exchange Rate Regime, Real Misalignment and Currency Crises

2009 ◽  
Author(s):  
Oliver Holtemmller ◽  
Sushanta Mallick
Keyword(s):  
Exchange Rate ◽  
Currency Crises ◽  
Exchange Rate Regime

scholarly journals Investigating the Economic and Financial Damage around Currency Peg Failures

2019 ◽  
Vol 12 (2) ◽  
pp. 92 ◽  
Author(s):  
Colin Ellis ◽  
Emilia Gyoerk
Keyword(s):  
Exchange Rate ◽  
Financial Stability ◽  
Currency Crises ◽  
Exchange Rate Regime ◽  
Banking Crisis ◽  
Banking System ◽  
Economic Damage ◽  
Real Economy ◽  
The Past ◽  
Floating Exchange Rate

The choice and structure of a country’s exchange rate regime has wide implications for the effectiveness and flexibility of monetary policy tools, as well as for economic and financial stability. We examine 21 instances where exchange rate pegs have been abandoned in the past, to gauge the potential economic damage associated with pegs failing. The sample includes major exchange rate shifts over the past thirty years, spanning from the Latin America currency crises of the 1990s to the peg abandonment in Egypt in 2016. Given the close interconnection of banks to the sovereign and the real economy, risks often flow through to, and can also be magnified by, the banking system. We therefore examine the interaction of currency peg abandonment with the occurrence of a banking crisis to investigate the different circumstances and impacts of exchange rate pegs failing. We have found that countries that simultaneously suffered a systemic banking crisis during the period of exchange rate regime shift also experienced significantly greater economic and financial damage following the adoption of a freely floating exchange rate. Nevertheless, regardless of whether there was a banking crisis, countries start showing signs of recovery after the same amount of time once the currency floated.

Exchange rate regime choice and currency crises

2011 ◽  
Vol 35 (3) ◽  
pp. 419-436 ◽  
Author(s):  
Ahmet Atıl Aşıcı
Keyword(s):  
Exchange Rate ◽  
Currency Crises ◽  
Exchange Rate Regime

Stability of the Exchange–Rate Agreements and Public Debt Management: the Italian Experience within the EMS

2002 ◽  
Vol 20 (1) ◽  
pp. 53-73
Author(s):  
Bernardo Maggi
Keyword(s):  
Exchange Rate ◽  
Public Debt ◽  
Critical Condition ◽  
Currency Crises ◽  
Exchange Rate Regime ◽  
Point Of View ◽  
Debt Management ◽  
Specific Reference ◽  
Italian Experience ◽  
Public Debt Management

Abstract This paper analyses the issue of the interdependence between fundamentals and expectations in the emergence of a currency crisis from both a theoretical and an empirical point of view with specific reference to the Italian case.Theoretically, currency crises depend as much on fundamentals as on expectations, and the latter again on the critical condition of the former for the associated profit opportunity. Hence, in order to reduce the risk of a new speculative attack, an appropriate public debt management, which for its high level is the main fundamental in Italy, and fiscal policy must be adopted. These may be implemented with the evaluation of the probability associated to devaluation, which enables the policy-maker to identify the critical condition for die occurrence of the crisis. The empirical analysis also provides evidence in favour of the theory that points public budget government policy as one of the major factors in leading to a non-viable fixed exchange rate regime.

Currency Crises and Exchange Rate Exposure

2013 ◽  
Vol 21 (1) ◽  
pp. 49-70
Author(s):  
Jin-Wan Cho ◽  
AiLian Bian ◽  
Kyung-In Park
Keyword(s):  
Exchange Rate ◽  
Currency Crises ◽  
Foreign Currency ◽  
Exchange Rate Regime ◽  
Exchange Rate Volatility ◽  
Flexible Exchange Rate ◽  
Firm Level ◽  
Exchange Rate Exposure ◽  
Floating Exchange Rate ◽  
The Government

While undergoing currency crises, countries under fixed exchange rate regime elect to adopt flexible exchange rate regime. It is generally expected that if a country launches floating exchange rate regime, the exchange rate volatility increases. Therefore, the increase in exchange rate volatility may increase exposures to currency risks at the firm level. Previous research, however, such as Bian, Park and Cho (2006) shows that right after the currency crisis of 1997~1998, currency risk exposure for Korean firms actually decreased after the government adopted flexible exchange rate regime. In this study, we intend to study the effects of changes in exchange rate regimes on foreign currency exposures at the firm level around the currency crises in the 1990s using worldwide data. We use 2116 firms in 23 countries finds evidence that exchange rate exposure of majority of firms decreases after the financial crises. In a sub-sample analysis in which sub-samples are created depending on whether the home country changed exchange rate regime from fixed to flexible, we find that the reduction of exposure was greater for firms in countries that changed the regimes than those in countries that did not.

Exchange rate regime, real misalignment and currency crises

2013 ◽  
Vol 34 ◽  
pp. 5-14 ◽  
Author(s):  
Oliver Holtemöller ◽  
Sushanta Mallick
Keyword(s):  
Exchange Rate ◽  
Currency Crises ◽  
Exchange Rate Regime

Exchange Rate Regimes and Economic Stability

2010 ◽  
pp. 29-43
Author(s):  
S. Smirnov
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Exchange Rate Regime ◽  
Exchange Rate Policy ◽  
Real Sector ◽  
Economic Stability ◽  
Exogenous Shocks ◽  
Floating Exchange Rate ◽  
Rate Policy ◽  
Managed Floating

The Bank of Russia intends to introduce inflation targeting policy and exchange rate free floating regime in three years. Exogenous shocks absorption which stabilizes the real sector of economy is usually considered to be one of the advantages of free floating exchange rate policy. However, our research based on the analysis of 25 world largest economies exchange rates and industrial production during the crisis of 2008-2009 does not confirm this hypothesis. The article also analyzes additional risks associated with free floating exchange rate regime in Russia and presents some arguments in favor of managed floating exchange rate regime.

Impact of external currency exposures on macroeconomic policies

2020 ◽  
pp. 23-40
Author(s):  
I. V. Prilepskiy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Positive Impact ◽  
Exchange Rate Regime ◽  
Macroeconomic Policies ◽  
Panel Regressions ◽  
Financial Account ◽  
Currency Exposure ◽  
Cross Country ◽  
The Impact

Based on cross-country panel regressions, the paper analyzes the impact of external currency exposures on monetary policy, exchange rate regime and capital controls. It is determined that positive net external position (which, e.g., is the case for Russia) is associated with a higher degree of monetary policy autonomy, i.e. the national key interest rate is less responsive to Fed/ECB policy and exchange rate fluctuations. Therefore, the risks of cross-country synchronization of financial cycles are reduced, while central banks are able to place a larger emphasis on their price stability mandates. Significant positive impact of net external currency exposure on exchange rate flexibility and financial account liberalization is only found in the context of static models. This is probably due to the two-way links between incentives for external assets/liabilities accumulation and these macroeconomic policy tools.

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