The Interest Rate-Exchange Rate Nexus in the Asian Crisis Countries

Sharp exchange rate depreciations in the East Asian crisis countries (Indonesia, Korea, and Thailand) raised doubts about the efficacy of increasing interest rates to defend the currency. Using a standard monetary model of exchange rate determination, this paper shows that tighter monetary policy wa...

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Bibliographic Details
Main Author: Ghosh, Atish
Other Authors: Basurto, Gabriela
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2000
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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651 4 |a Korea, Republic of 
653 |a Interest rates 
653 |a Investment 
653 |a Money and Interest Rates: General 
653 |a Finance 
653 |a Return on investment 
653 |a Monetary economics 
653 |a Currency; Foreign exchange 
653 |a Financial services 
653 |a Real interest rates 
653 |a Monetary Policy, Central Banking, and the Supply of Money and Credit: General 
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653 |a Foreign Exchange 
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653 |a Saving and investment 
653 |a Banks and Banking 
653 |a Investments: General 
653 |a Demand for money 
653 |a Macroeconomics 
653 |a Interest Rates: Determination, Term Structure, and Effects 
653 |a Capacity 
653 |a Exchange rates 
653 |a Capital 
653 |a Money and Monetary Policy 
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520 |a Sharp exchange rate depreciations in the East Asian crisis countries (Indonesia, Korea, and Thailand) raised doubts about the efficacy of increasing interest rates to defend the currency. Using a standard monetary model of exchange rate determination, this paper shows that tighter monetary policy was in fact associated with an appreciation of the exchange rate. Moreover, there is little evidence of higher real interest rates contributing to a widening of the risk premium