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Volume 2006 |Article ID 035752 | https://doi.org/10.1155/JAMDS/2006/35752

Tim Brailsford, Jack H. W. Penm, Chin Diew Lai, "Effectiveness of high interest rate policy on exchange rates: A reexamination of the Asian financial crisis", Advances in Decision Sciences, vol. 2006, Article ID 035752, 9 pages, 2006. https://doi.org/10.1155/JAMDS/2006/35752

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

Received25 Dec 2005
Revised29 Jun 2006
Accepted30 Jun 2006
Published18 Sep 2006

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.

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Copyright © 2006 Tim Brailsford et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


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