Financial crises and monetary policy

In the last three decades, many countries and regions around the world have suffered from currency crises. This thesis investigates the causes of such crises and assesses the role of monetary policy as a tool to avoid them or limit the damage they impose. In addition, it studies the impact of the recent introduction of credit derivatives on the resolution of debt crises. The main message of this thesis is that corporate balance sheet vulnerabilities can be an important determinant of crises. First, these vulnerabilities can erode the commitment of policymakers to maintain a fixed exchange rate by increasing the costs of doing so. Second, these vulnerabilities can also lower the extent to which monetary policy can be used to support the exchange rate.