TY - BOOK ID - 134357240 TI - Exchange Rates During the Crisis AU - Weber, Sebastian AU - Wyplosz, Charles PY - 2009 PB - Washington, D.C., The World Bank, DB - UniCat KW - Budget deficits KW - Central bank KW - Central bank policy KW - Central banks KW - Competitive devaluations KW - Currencies and Exchange Rates KW - Currency KW - Debt Markets KW - Devaluation KW - Economic Stabilization KW - Economic Theory and Research KW - Emerging Markets KW - Exchange rate KW - Exchange rate intervention KW - Exchange rate interventions KW - Exchange rate movements KW - Exchange rates KW - Finance and Financial Sector Development KW - Financial architecture KW - Financial crises KW - Foreign exchange KW - Foreign exchange market KW - Interest rates KW - International trade KW - Macroeconomics and Economic Growth KW - Poverty reduction KW - Private Sector Development UR - https://www.unicat.be/uniCat?func=search&query=sysid:134357240 AB - Nearly two years after the onset of the financial crises, many central banks have brought their policy interest rates down to, or close to zero. Various governments have seen their budget deficits soar. Both policies have affected exchange rates, partly through market expectations. With a majority of exchange rates officially floating, exchange rate movements do not necessarily reflect official decisions as was the case in the 1930s. Yet, also in the 2008 crisis, authorities have directly intervened in the foreign exchange market, sometimes in order to defend a falling currency but in other instances with the aim to limit appreciation pressure, akin of competitive devaluations. This paper documents the exchange rate interventions during the height of the 2008/09 financial crisis and identifies the countries which have particular high incentives to intervene in the foreign exchange market to competitively devalue their currency. While various countries had increased incentives to devalue, we find that direct exchange rate interventions have been rather limited and contagion of devaluation has been restricted to one regionally contained case. However, sharp market-driven exchange rate movements have reshaped competitive positions. It appears that these movements have so far not seriously disrupted global trade. After all, a world crisis is likely to require widespread exchange rate adjustments as different countries are affected in different ways and have different capacities to weather the shocks. ER -