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A Structural VAR of Currency Crisis Economies under Credit Constraints
Penulis/Peneliti : Lestano (Unika Atma Jaya) and Elmer Sterken (University of Groningen and CESifo, Munich)

 

Bidang Penelitian : Credit Constraints, Currency Crises, Structural VAR

 

Jurnal : Research Report

 

Volume : -

 

Tahun : 2012

 

We model the transmission of currency crises onto the domestic economic development of Indonesia, Malaysia, the Philippines, South Korea, and Thailand. We use a Structural VAR (SVAR), based on a theoretical model stressing credit constraints. We present two approaches to identify the parameters of the model: (1) with short-run constraints, like price stickiness, and (2) with long-run restrictions, like uncovered interest parity and the quantity theory of money. SVAR model with data-break is simulated to take into account 1997-1998 Asian financial crises. We show that the impact of domestic interest rate shocks resulting from currency crises is larger than the impact of exchange rate shocks. Especially Indonesia seems to suffer from the ‘credit channel of a currency crisis’.
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