Post-Crisis Exchange Rate Policy in Five Asian Countries: Filling in the "Hollow Middle"?
IMF Working Papers, November 1, 2001
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Bibliographic details
- Authors: Leonardo Hernández, Peter J Montiel
- Published: November 1, 2001
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451858426.001
Summary and central finding
- Following the 1997-98 financial turmoil, crisis countries in Asia moved toward either floating or fixed exchange rate systems, reinforcing the bipolar view of exchange rate regimes and the "hollow middle" hypothesis.
- Some academics have claimed that the crisis countries' policies have been similar in the post- and pre-crisis periods.
- This paper analyzes the evidence and concludes that, except for Malaysia, the crisis countries are floating more than before, though less than "real" floaters do.
- The crisis countries' policies during the post-crisis period can be justified on second-best arguments.
Country-specific finding
- Malaysia:
- Adopted a hard peg.
- Imposed capital controls.
- Other crisis countries:
- Adopted more floating than in the pre-crisis period.
- Floating degree remains less than that of "real" floaters.
Policy interpretation and implications
- The observed shift toward either floating or fixed regimes supports the bipolar view of exchange rate regimes and the "hollow middle" hypothesis.
- The post-crisis policy choices can be defended on second-best grounds, implying that constraints and practical considerations shaped regime selection rather than strict adherence to pre-crisis approaches or to a pure-floating ideal.
Publication and metadata (exact values preserved)
- Authors: Leonardo Hernández, Peter J Montiel
- Date: November 1, 2001
- Pages: 41
- Volume: 2001
- Issue: 170
- Series: Working Paper No. 2001/170
- DOI: https://doi.org/10.5089/9781451858426.001
- Stock No: WPIEA1702001
- ISBN: 9781451858426
- ISSN: 1018-5941
- Subjects: Currency markets, Exchange rate arrangements, Exchange rate policy, Exchange rates, Financial crises, Financial markets, Foreign exchange
- Keywords: Asia and Pacific, crisis country, crisis exchange rate policy, Currency markets, Exchange rate arrangements, exchange rate fluctuation, exchange rate movement, exchange rate policy, exchange rate regime, exchange rate variability, Exchange rates, foreign exchange market, regime continuum, WP
Post-Crisis Exchange Rate Policy in Five Asian Countries: Filling in the "Hollow Middle"?, IMF Working Papers 2001, 170 (2001).