IMF Working Papers

Balance of Payments Anti-Crises

By Isabel K. Yan, Michael Kumhof

June 1, 2009

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Isabel K. Yan, and Michael Kumhof. Balance of Payments Anti-Crises, (USA: International Monetary Fund, 2009) accessed December 22, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Several emerging economies have, until recently, experienced large government surpluses and accelerating foreign exchange reserve accumulation. This has been accompanied by economic booms, exchange rate appreciations and in some cases increases in domestic inflation. We show that one way to understand these episodes is as manifestations of balance of payments anti-crises, as reflecting the perception that the government intends to discontinue its accumulation of reserves in the near future. The end-phase of such crises is characterized by nominal interest rates approaching their zero lower bound in accelerating fashion and, if the government targets CPI inflation, by fast increasing domestic inflation.

Subject: Central banks, Exchange rates, Foreign exchange, Inflation, Inflation targeting, International reserves, Monetary policy, Prices, Reserves accumulation, Zero lower bound

Keywords: Balance of payments anti-crises, Central bank, CPI inflation targeting, Exchange rate appreciation, Exchange rate targeting, Exchange rates, Foreign exchange, Foreign exchange reserves, Global, Inflation, Inflation dynamics, Inflation targeting, International reserves, Price level, Rate of exchange rate depreciation, Reserves accumulation, WP

Publication Details

  • Pages:

    22

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2009/134

  • Stock No:

    WPIEA2009134

  • ISBN:

    9781451872811

  • ISSN:

    1018-5941