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297.8

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This study contributes to the literature on capital account crises in two ways. First, our analysis of crisis episodes between 1994 and 2002 establishes a clear relationship between the persistence of crises, their complexity, and the intensity of movement of key macroeconomic variables. Second, we provide a systematic examination of the determinants of crisis duration. Our econometric analysis suggests that initial conditions and the external environment plays a key role in determining crisis persistence. The policy response also matters, but cannot offset a record of poor past policies. Overall, the results underscore the critical importance of crisis prevention efforts.

Finance --- Business & Economics --- International Finance --- Capital movements. --- Financial crises. --- Crashes, Financial --- Crises, Financial --- Financial crashes --- Financial panics --- Panics (Finance) --- Stock exchange crashes --- Stock market panics --- Capital flight --- Capital flows --- Capital inflow --- Capital outflow --- Flight of capital --- Flow of capital --- Movements of capital --- Crises --- Balance of payments --- Foreign exchange --- International finance --- Banks and Banking --- Exports and Imports --- Financial Risk Management --- Foreign Exchange --- Current Account Adjustment --- Short-term Capital Movements --- International Lending and Debt Problems --- Duration Analysis --- Index Numbers and Aggregation --- leading indicators --- Financial Crises --- Interest Rates: Determination, Term Structure, and Effects --- International economics --- Economic & financial crises & disasters --- Currency --- Financial crises --- Capital account crisis --- Real interest rates --- Exchange rate arrangements --- External debt --- Financial services --- Interest rates --- Debts, External --- Turkey

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Foreign exchange intervention is widely used as a policy tool, particularly in emerging markets, but many facets of this tool remain limited, especially in the context of flexible exchange rate regimes. The Latin American experience can be informative because some of its largest countries adopted floating exchange rate regimes and inflation targeting while continuing to intervene in foreign exchange markets. This edited volume reviews detailed accounts from several Latin American countries’ central banks, and it provides insight into how and with what aim many interventions were decided and implemented. This book documents the effectiveness of intervention and pays special attention to the role of foreign exchange intervention policy within inflation-targeting monetary frameworks. The main lesson from Latin America’s foreign exchange interventions, in the context of inflation targeting, is that the region has had a considerable degree of success. Transparency and a clear communication policy have been key. For economies that are not highly dollarized, rules-based intervention helped contain financial instability and build international reserves while preserving inflation targets. The Latin American experience can help other countries in the design and implementation of their policies.

Foreign exchange --- Latin America. --- Lateinamerika --- United States

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We investigate the motives inflation-targeting central banks in emerging markets may have for intervening in foreign exchange markets and evaluate the case for such interventions based on the existing literature. Our findings suggest that the rationale for interventions depends on initial conditions and country-specific circumstances. The case is strongest in the presence of large currency mismatches or underdeveloped markets. While interventions can have benefits in the short-term, sustained over time they could entrench unfavorable initial conditions, though more work is needed to establish this empirically. A first effort to measure the cost of interventions to the credibility of policy frameworks suggests that the negative impact may be smaller than often assumed—at least for the set of more sophisticated inflation-targeting emerging-market central banks considered here.

Banks and Banking --- Foreign Exchange --- Inflation --- Money and Monetary Policy --- Finance: General --- International Investment --- Long-term Capital Movements --- Current Account Adjustment --- Short-term Capital Movements --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Price Level --- Deflation --- Monetary Policy --- International Financial Markets --- Currency --- Foreign exchange --- Banking --- Macroeconomics --- Monetary economics --- Finance --- Exchange rates --- Inflation targeting --- Exchange rate flexibility --- Prices --- Monetary policy --- Currency markets --- Financial markets --- Banks and banking --- Foreign exchange market --- Indonesia