If, for example, the Bank of Japan maintains its current very low interest rates while the Fed raises rates, traders may borrow in yen and lend in dollars, which would likely raise the USD/JPY exchange rate. However, when several central banks simultaneously signal monetary policy tightening, the exchange rate effects are harder to predict. The impact of monetary policies on exchange rate is important because the exchange rate is known as a channel in the direction of monetary shocks on the real sector of the economy. Some studies have been performed on monetary policy and its impact on the exchange rate both inside and outside the country, but they have not Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis? ILAN GOLDFAJN and POONAM GUPTA* This paper provides evidence on the relationship between monetary policy and the exchange rate in the aftermath of currency crises. It analyzes a large dataset of currency crises in 80 countries for the period 1980–98. The main question