Mundell-Fleming Lecture: Contractionary Currency Crashes in Developing Countries

摘要: To update a famous old statistic: political leader in developing country is almost twice as likely to lose office the six months following currency crash otherwise. This difference, which highly significant statistically, holds regardless of whether devaluation takes place context an IMF program. Why are devaluations so costly? Many crises last 10 years have been associated with output loss. Is this, alleged, because excessive reliance on raising interest rate policy response? More it contractionary effects devaluation. There various possible devaluation, but appropriate that balance sheet effect receives most emphasis. Pass-through from exchange changes import prices countries not problem: this coefficient fell 1990s, look at some narrowly defined products shows. Rather sheets problem. How can mitigate fall resulting crises? In shorter term, adjusting promptly after inflows cease better than procrastinating by shifting short-term dollar debt, raises costliness when finally comes. longer greater openness trade reduces vulnerability both sudden stops and crashes.