Exchange Rate Regimes, Capital Flows and Crisis Prevention

Exchange Rate Regimes, Capital Flows and Crisis Prevention
Title Exchange Rate Regimes, Capital Flows and Crisis Prevention PDF eBook
Author Sebastian Edwards
Publisher
Pages 86
Release 2001
Genre Capital movements
ISBN

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In this paper I analyze, within the context of the new 'financial architecture, ' the relationship between exchange rate regimes, capital flows and currency crises in emerging economies. The paper draws on lessons learned during the 1990s, and deals with some of the most important policy controversies that emerged after the Mexican, East Asian, Russian and Brazilian crises. I evaluate some recent proposals for reforming the international financial architecture that have emphasized exchange rate regimes and capital mobility. I discuss emerging markets' ability to have floating exchange rate regime, and I analyze issues related to 'dollarization.'

Preventing Currency Crises in Emerging Markets

Preventing Currency Crises in Emerging Markets
Title Preventing Currency Crises in Emerging Markets PDF eBook
Author Sebastian Edwards
Publisher University of Chicago Press
Pages 782
Release 2002-11-15
Genre Business & Economics
ISBN 9780226184944

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Economists and policymakers are still trying to understand the lessons recent financial crises in Asia and other emerging market countries hold for the future of the global financial system. In this timely and important volume, distinguished academics, officials in multilateral organizations, and public and private sector economists explore the causes of and effective policy responses to international currency crises. Topics covered include exchange rate regimes, contagion (transmission of currency crises across countries), the current account of the balance of payments, the role of private sector investors and of speculators, the reaction of the official sector (including the multilaterals), capital controls, bank supervision and weaknesses, and the roles of cronyism, corruption, and large players (including hedge funds). Ably balancing detailed case studies, cross-country comparisons, and theoretical concerns, this book will make a major contribution to ongoing efforts to understand and prevent international currency crises.

Capital Flows at Risk: Taming the Ebbs and Flows

Capital Flows at Risk: Taming the Ebbs and Flows
Title Capital Flows at Risk: Taming the Ebbs and Flows PDF eBook
Author Mr.R. G Gelos
Publisher International Monetary Fund
Pages 44
Release 2019-12-20
Genre Business & Economics
ISBN 1513522906

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The volatility of capital flows to emerging markets continues to pose challenges to policymakers. In this paper, we propose a new framework to answer critical policy questions: What policies and policy frameworks are most effective in dampening sharp capital flow movements in response to global shocks? What are the near- versus medium-term trade-offs of different policies? We tackle these questions using a quantile regression framework to predict the entire future probability distribution of capital flows to emerging markets, based on current domestic structural characteristics, policies, and global financial conditions. This new approach allows policymakers to quantify capital flows risks and evaluate policy tools to mitigate them, thus building the foundation of a risk management framework for capital flows.

Foreign Exchange Intervention Rules for Central Banks: A Risk-based Framework

Foreign Exchange Intervention Rules for Central Banks: A Risk-based Framework
Title Foreign Exchange Intervention Rules for Central Banks: A Risk-based Framework PDF eBook
Author Romain Lafarguette
Publisher International Monetary Fund
Pages 33
Release 2021-02-12
Genre Business & Economics
ISBN 1513569406

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This paper presents a rule for foreign exchange interventions (FXI), designed to preserve financial stability in floating exchange rate arrangements. The FXI rule addresses a market failure: the absence of hedging solution for tail exchange rate risk in the market (i.e. high volatility). Market impairment or overshoot of exchange rate between two equilibria could generate high volatility and threaten financial stability due to unhedged exposure to exchange rate risk in the economy. The rule uses the concept of Value at Risk (VaR) to define FXI triggers. While it provides to the market a hedge against tail risk, the rule allows the exchange rate to smoothly adjust to new equilibria. In addition, the rule is budget neutral over the medium term, encourages a prudent risk management in the market, and is more resilient to speculative attacks than other rules, such as fixed-volatility rules. The empirical methodology is backtested on Banco Mexico’s FXIs data between 2008 and 2016.

Financial Crises Explanations, Types, and Implications

Financial Crises Explanations, Types, and Implications
Title Financial Crises Explanations, Types, and Implications PDF eBook
Author Mr.Stijn Claessens
Publisher International Monetary Fund
Pages 66
Release 2013-01-30
Genre Business & Economics
ISBN 1475561008

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This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.

Capital Flows and Crises

Capital Flows and Crises
Title Capital Flows and Crises PDF eBook
Author Barry J. Eichengreen
Publisher MIT Press
Pages 396
Release 2004
Genre Business & Economics
ISBN 9780262550598

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An analysis of the connections between capital flows and financial crises as well as between capital flows and economic growth.

China’s Evolving Exchange Rate Regime

China’s Evolving Exchange Rate Regime
Title China’s Evolving Exchange Rate Regime PDF eBook
Author Mr.Sonali Das
Publisher International Monetary Fund
Pages 31
Release 2019-03-07
Genre Business & Economics
ISBN 1498302025

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China’s exchange rate regime has undergone gradual reform since the move away from a fixed exchange rate in 2005. The renminbi has become more flexible over time but is still carefully managed, and depth and liquidity in the onshore FX market is relatively low compared to other countries with de jure floating currencies. Allowing a greater role for market forces within the existing regime, and greater two-way flexibility of the exchange rate, are important steps to build on the progress already made. This should be complemented by further steps to develop the FX market, improve FX risk management, and modernize the monetary policy framework.