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Crise de change et politique monétaire optimale dans un modèle de troisième génération : le rôle de la prime de risque

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  • Vincent Bouvatier

    (TEAM)

Abstract

This article relates to the choice of the optimal monetary policy during a currency crisis. Aghion, Bacchetta and Banerjee (1999, 2000, 2001) show that a restrictive monetary policy is optimal if economy is strongly in debt in foreign currency and if the effect of credit channel is weak. However, this result is obtained with an assumption of perfect substituability of assets - the risk premium is equal to zero. The introduction of a risk premium in the theoretical model can be justified with an econometric approach for Thailand and to a lesser extent for South Korea. The efficiency of the monetary policy during a currency crisis is reduced when the risk premium plays an important part in the determination of the interest rate differential. Under these conditions, capital controls could be a more adequate policy to manage a currency crisis

Suggested Citation

  • Vincent Bouvatier, 2004. "Crise de change et politique monétaire optimale dans un modèle de troisième génération : le rôle de la prime de risque," Cahiers de la Maison des Sciences Economiques bla04089, Université Panthéon-Sorbonne (Paris 1).
    • Handle: RePEc:mse:wpsorb:bla04089
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    Cited by:

    1. U. Michael Bergman & Shakill Hassan, 2008. "Currency Crises and Monetary Policy in an Economy with Credit Constraints: The No Interest Parity Case," EPRU Working Paper Series 08-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.

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    More about this item

    Keywords

    Monetary policy; currency crisis; risk premium;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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