search query: @author Bacchetta, P. / total: 8
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| Author: | Aghion, P. Bacchetta, P. Banerjee, A. |
| Title: | A simple model of monetary policy and currency crises |
| Journal: | European Economic Review
2000 : MAY, VOL. 44:4-6, p. 728-738 |
| Index terms: | Monetary policy Currency Crises Debt Companies Models |
| Language: | eng |
| Abstract: | This paper analyzes the optimal interest rate policy in currency crises. Firms are credit constrained and have debt in domestic and foreign currency. This situation that may easily lead to a currency crisis. An interest rate increase has an ambiguous effect on firms since it makes more difficult to borrow and may decrease the foreign currency debt burden. In some cases it is actually best to decrease the interest rate. It is also shown how these issues are related to the development of the financial system. |
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