Effectiveness of high interest rate policy on exchange rates: A reexamination of the Asian financial crisis

Tim Brailsford, Jack H.W. Penm, Chin Diew Lai

Research output: Contribution to journalArticleResearchpeer-review

3 Citations (Scopus)

Abstract

One of the most controversial issues in the aftermath of the Asian financial crisis has been the appropriate response of monetary policy to a sharp decline in the value of some currencies. In this paper, we empirically examine the effects on Asian exchange rates of sharply higher interest rates during the Asian financial crisis. Taking account of the currency contagion effect, our results indicate that sharply higher interest rates helped to support the exchange rates of South Korea, the Philippines, and Thailand. For Malaysia, no significant causal relation is found from the rate of interest to exchange rates, as the authorities in Malaysia did not actively adopt a high interest rate policy to defend the currency.

Original languageEnglish
Article number35752
JournalJournal of Applied Mathematics and Decision Sciences
Volume2006
DOIs
Publication statusPublished - 2006
Externally publishedYes

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