Financial crises and exchange rate policy

• 成果类型: Article
• 署名作者: Fornaro, Luca
• 署名单位: Pompeu Fabra University; Barcelona School of Economics; Centre de Recerca en Economia Internacional (CREI)
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2014.11.009
• 发表日期: 2015
• 页码: 202-215
• 关键词: Financial crises; monetary policy; sudden stops; Exchange rate regime; Nominal wage rigidities; Pecuniary externalities

摘要

This paper studies exchange rate policy in a small open economy model featuring an occasionally binding collateral constraint and Fisherian deflation. The goal is to evaluate the performance of alternative exchange rate policies in sudden stop-prone economies. The key element of the analysis is a pecuniary externality arising from frictions in the international credit markets, which creates a trade-off between price and financial stability. The main result is that depreciating the exchange rate during a financial crisis has a positive impact on welfare, because the stimulus provided by a depreciation sustains asset prices, value of collateral, and access to the international credit markets. (C) 2014 Elsevier B.V. All rights reserved.