A Simple Model of Monetary Policy and Currency Crises

Preprint OPEN
Philippe AGHION; Philippe BACCHETTA; Abhijit BANERJEE;
  • Subject: policy; foreign currency debt; currency crisis
    • jel: jel:E4 | jel:E5 | jel:F3

This paper analyzes the optimal interest rate policy in currency crises. Firms are credit constrained and have debt in domestic and foreign currency, a situation that may easily lead to a currency crisis. An interest rate increase has an ambiguous effect on firms since ... View more
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