A common feature of emerging market crisis is a sharp depreciation of its currencies. In these episodes, the usual “overshooting” phenomena took place, with FX depreciating in real terms 68% in Argentina and 46% in Russia. But, as economies begun to stabilize, currencies entered a process of appreciation in real terms, reducing almost half of the initial jump.
The close involvement of central banks in the supervisory process has various advantages. It gives the central bank a much clearer picture of the economic reality that is behind the numbers visible in the books of banks.