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Responses of Monetary Authorities in Emerging Economies to International Financial Crises: What Do We Really know?

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  • Jean Pierre Allegret
Abstract
This paper analyses policy options available for emerging economies to cope with the financial crises. A seminal paper on this question has been published by Kaminsky et al. (2005). Their main conclusion was that developing countries exhibit pro-cyclical fiscal and monetary policies, amplifying the destabilizing effects of capital inflows. The global financial crisis of 2008-09 had led to a renewed interest of the analysis concerning economic policies responses in emerging countries to financial crises. A growing number of studies have provided new empirical evidences according to which emerging economies tend to adopt more frequently counter-cyclical policies to face crises. The main purpose of this paper is to survey the literature on policy responses in emerging countries to financial crises. More precisely, we identify what are the main factors explaining the behavior of monetary policy during financial crises. Two main lessons can be drawn. On the one hand, initial conditions matter. In other words, the ability to face financial crises depends on pre-crisis vulnerabilities. On the other hand, the currency mismatch appears as one of the main impediments to conduct countercyclical monetary policies.

Suggested Citation

  • Jean Pierre Allegret, 2012. "Responses of Monetary Authorities in Emerging Economies to International Financial Crises: What Do We Really know?," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 3-32.
    • Handle: RePEc:ers:journl:v:xv:y:2012:i:3:p:3-32
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    More about this item

    Keywords

    Monetary Policy; Monetary Authorities; Emerging Economies; International Financial Crises;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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