Managing Currency Crises in Emerging Markets
The contributions here explore the management process from the beginning of a crisis to the long-term effects of the techniques used to minimize it. The first three chapters focus on the earliest responses and the immediate defense of a currency under attack, exploring whether unnecessary damage to economies can be avoided by adopting the right response within the first few days of a financial crisis. Next, contributors examine the adjustment programs that follow, considering how to design these programs so that they shorten the recovery phase, encourage economic growth, and minimize the probability of future difficulties. Finally, the last four papers analyze the actual effects of adjustment programs, asking whether they accomplish what they are designed to do-and whether, as many critics assert, they impose disproportionate costs on the poorest members of society.
Recent high-profile currency crises have proven not only how harmful they can be to neighboring economies and trading partners, but also how important policy responses can be in determining their duration and severity. Economists and policymakers will welcome the insightful evaluations in this important volume, and those of its companion, Sebastian Edwards and Jeffrey A. Frankel's Preventing Currency Crises in Emerging Markets.
Michael P. Dooley and Jeffrey A. Frankel
I. THE DEFENSE
1. Interest Rates and Exchange Rates in the Korean, Philippine, and Thai Exchange Rate Crises
Dongchul Cho and Kenneth D. West
Comment: Robert Dekle
2. Interest Rate Defense against Speculative Attack as a Signal: A Primer
Comment: Robert P. Flood
3. Does It Pay to Defend against a Speculative Attack?
Barry Eichengreen and Andrew K. Rose
Comment: Richard Portes
II. THE PROGRAM
4. The International Lender of Last Resort: How Large Is Large Enough?
Olivier Jeanne and Charles Wyplosz
Comment: Olivier Blanchard
5. Rescue Packages and Output Losses Following Crises
Michael P. Dooley and Sujata Verma
Comment: Andrew Powell
6. Financial Restructuring in Banking and Corporate-Sector Crises: What Policies to Pursue?
Stijn Claessens, Daniela Klingebiel, and Luc Laeven
Comment: Peter B. Kenen
7. On the Fiscal Implications of Twin Crises
A. Craig Burnside, Martin Eichenbaum, and Sergio Rebelo
Comment: Kenneth Kletzer
8. An Evaluation of Proposals to Reform the International Financial Architecture
Comment: Andrew Berg
III. THE IMPACT
9. Recovery and Sustainability in East Asia
Yung Chul Park and Jong-Wha Lee
Comment: Richard Portes
10. A Cure Worse Than the Disease? Currency Crises and the Output Costs of IMF-Supported Stabilization Programs
Michael M. Hutchison
Comment: Gian Maria Milesi-Ferretti
11. IMF and World Bank Structural Adjustment Programs and Poverty
Comment: Edwin M. Truman
12. Impacts of the Indonesian Economic Crisis: Price Changes and the Poor
James Levinsohn, Steven Berry, and Jed Friedman
Comment: Lant Pritchett