| Controlling Currency Mismatches in Emerging Markets Contributor(s): Goldstein, Morris (Author), Turner, Philip (Author) |
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ISBN: 0881323608 ISBN-13: 9780881323603 Publisher: Peterson Institute for International Economic OUR PRICE: $23.71 Product Type: Paperback - Other Formats Published: April 2004 Annotation: This book addresses a vulnerability that has been present in virtually every major financial crisis in emerging markets over the past decade: currency mismatches. By "currency mismatch," the authors mean the sensitivity of an entity's net worth or net income to changes in the exchange rate. The authors note that the countries that have experienced the largest currency mismatches have typically been the ones that have suffered the largest output losses during crises. In addition, they explain how currency mismatches can adversely constrain the scope for cuts in interest rates during a crisis and can contribute to a "fear of floating" in the conduct of exchange rate policy. Drawing these strands together, the authors construct a new measure of what they call "aggregate effective currency mismatch" -- or AECM -- and show how it has behaved for 22 emerging economies over the 19942002 period. |
| Additional Information |
| BISAC Categories: - Business & Economics | Economics - Comparative - Business & Economics | International - Economics - Business & Economics | Money & Monetary Policy |
| Dewey: 332.456 |
| LCCN: 2004048278 |
| Physical Information: 0.39" H x 6.06" W x 9.02" (0.60 lbs) 192 pages |
| Descriptions, Reviews, Etc. |
| Publisher Description: In most of the currency crises of the 1990s, the largest output falls have occurred in those emerging economies with large currency mismatches, a phenomenon that occurs when assets and liabilities are denominated in different currencies such that net worth is sensitive to changes in the exchange rate. Currency mismatching makes crisis management much more difficult since it constrains the willingness of the monetary authority to reduce interest rates in a recession (for fear of initiating a large fall in the currency that would bring with it large-scale insolvencies). The mismatching also produces a "fear of floating" on the part of emerging economies, sometimes inducing them to make currency-regime choices that are not in their own long-term interest. Morris Goldstein and Philip Turner summarize what is known about the origins of currency mismatching in emerging economies, discuss how best to define and measure currency mismatching, and review policy options for reducing the size of the problem. |