Both empirical and theoretical studies suggest that currency attacks can occur even in a fixed exchange rate regime with sound fundamentals. Can mechanisms be designed to prevent such currency attacks? To address this question, we first need a theory of currency crisis. I argue that such a...

This paper examines the impact of renminbi revaluation on foreign firm valuation and, by implication, firm prospects. To deal with the potential endogeneity of exchange rate movements, we consider not just official announcements of exchange rate policy but also 27 instances of market-perceived...

For now, effective capital controls allow the Chinese authorities to retain regulated deposit and lending rates, quantitative credit guidance and bond market rationing. Relaxation of the capital controls would put these policies at risk. Reserve requirements can be extended to bank inflows from...

Asian policymakers are giving consideration to allowing their currencies to be used by non-residents. If policy allows this and a robust fixed income market provides support, the Australian experience indicates that a currency can internationalise fairly quickly, particularly if it offers a...

We apply an infinite horizon intertemporal optimization model to a simple speculative attack framework. Thereby, the central bank faces a one control two-state variables optimization problem with endogenuous exit. By setting the interest rate the central bank can stimulate the economy or fend...

This paper studies the design of optimal monetary policy rules for emerging economies confronted to sharp capital outflows and speculative attacks. We extend Taylor type monetary policy rules by allowing the central bank to give some weight to the level of precautionary foreign reserve balances...

With the global rise in authoritarianism, there has been an increase in political commentaries by the populist leaders that have criticized their central banks in favor of lower interest rates. We analyze the effects of these political pressures on exchange rates. We provide strong empirical...

This paper analyzes the relation between exchange rate volatility and several macroeconomic variables, namely real per capita output growth, the credit cycle, the stock of inward foreign direct investment (FDI) and the current account balance, in the Central and Eastern European EU Member...

A key challenge for macroeconomic policy in open economies is how to simultaneously manage exchange rates, interest rates and capital account openness - the trilemma. This paper calculates a trilemma index for India and investigates its evolution over time. We find that financial integration has...