Monetary policy in emerging markets: Can liability dollarization explain contractionary devaluations?

• 成果类型: Article
• 署名作者: Cook, D
• 署名单位: Hong Kong University of Science & Technology
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2003.12.002
• 发表日期: 2004
• 页码: 1155-1181
• 关键词: credit channel; foreign currency debt; sticky prices; devaluation

摘要

In emerging markets, external debt is denominated almost entirely in large, developed country currencies such as the U.S. dollar. This liability dollarization offers a channel through which exchange rate variation can lead to business cycle instability. When firms' assets are denominated in domestic currency and liabilities are denominated in foreign currency, an exchange rate depreciation worsens firms' balance sheets, which leads to higher capital costs and contractions in capital spending. To illustrate this, I construct a quantitative, sticky price, small open economy model in which a monetary policy induced devaluation leads to a persistent contraction in output. In this model, fixed exchange rates offer greater stability than an interest rule that targets inflation. (C) 2004 Elsevier B.V. All rights reserved.