Managing Currency Crises in Emerging Markets

TLDR

Managing financial crises in emerging markets is a high‑stakes, contentious challenge for public policy, and this volume, alongside its companion, offers insights for economists and policymakers. The book brings together leading economists to explore how to reduce the frequency and costs of currency crises, examining immediate defense strategies, post‑crisis adjustment programs, and their impacts on recovery, growth, and equity. The authors analyze three key areas: the immediate defense of a currency under attack, the design of adjustment programs to shorten recovery and promote growth, and the actual effects of these programs on outcomes and equity.

Abstract

How to manage financial crises in emerging markets is a high-stakes and contentious challenge for public policy today. In this book, leading economists -many of whom have also participated in policy debates on these issues - consider how best to reduce the frequency and costs of such crises. The first three chapters focus on the immediate defence of a currency under attack, exploring whether unnecessary damage to economies can be avoided by adopting the right response in the first few days of a financial crisis. Next, contributors examine the adjustment programs that follow crises, considering how to design these programs so that they shorten the recovery phase, encourage economic growth, and minimize the probability of future difficulties. Finally, the last four papers analyze the actual effects of adjustment programs, asking whether they accomplish what they are designed to do and whether they impose disproportionate costs on the poorest members of society. Economists and policymakers should welcome this volume, as they have its companion, Sebastian Edwards and Jeffrey A. Frankel's Preventing Currency Crises in Emerging Markets.