A Simple Model of Monetary Policy and Currency Crises

Details

Serval ID
serval:BIB_0D5F48B756EF
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
A Simple Model of Monetary Policy and Currency Crises
Journal
European Economic Review, Papers and Proceedings
Author(s)
Aghion P., Bacchetta P., Banerjee A.
ISSN
0014-2921
Publication state
Published
Issued date
2000
Peer-reviewed
Oui
Volume
44
Number
4-6
Pages
728-738
Language
english
Abstract
This paper analyzes the optimal interest rate policy in currency crises. Firms are credit constrained and have debt in domestic and foreign currency, a situation that may easily lead to a currency crisis. An interest rate increase has an ambiguous effect on firms since it both makes more difficult to borrow and may decrease the foreign currency debt burden. In some cases it is actually best to decrease the interest rate. We also show how these issues are related to development of the financial system.
Keywords
Monetary policy, Foreign currency debt, Currency crisis
Web of science
Create date
19/11/2007 10:28
Last modification date
20/08/2019 13:34
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