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on International Finance |
| By: | Ayca Topaloglu-Bozkurt; Tuba Pelin Sumer; Suheyla Ozyildirim |
| Abstract: | Using granular data from the Turkish banking system, we exploit a large currency depreciation in 2018 to explore whether, and how, banks’ cross-border FX borrowing evolved after the exchange rate shock. Our bank-level empirical findings show that a currency shock has a significant and negative impact on cross-border interbank FX borrowing, but the large foreign currency buffers held by banks mitigate the negative impact of the crisis on their FX borrowing. Furthermore, we find that the impact differs depending on the characteristics of the banks or the regional diversification of the lender banks. Sub-sample analysis via connectedness shows that the mitigating impact of an FX buffer is lower for strongly connected banks, while the analysis by business types indicates that the impact is higher for development banks. On the other hand, we find that the cross-border FX borrowing of resident banks decreases with the FX shock if the lender bank is located in advanced economies, but it increases if the lender banks are from emerging economies or the Middle East. Our results show the importance of diversification of funding partners to alleviate the negative impacts of an abrupt foreign currency depreciation on FX borrowing of the resident banks, i.e. to have a stable source of foreign exchange funding. |
| Keywords: | Cross-border FX borrowing, Currency shock, Connectedness, Diversification of Funding Partners |
| JEL: | G21 L14 F34 G15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2513 |
| By: | Olivier De Jonghe, Tong Zhao (National Bank of Belgium, Research Department) |
| Abstract: | This paper studies the role of collateral using the euro area corporate credit registry, Ana-Credit. We document key facts about the importance, distribution, and composition of collateral, including its presence, types, and values. On average, 70 % of credit amounts are collateralized. Real estate and financial assets are the most pledged, while physical movable assets and other intangible assets are less present. In addition, we show that the aggregate collateral value pledged to the banking sector is substantial, driven mainly by real estate in most countries. For the first time, we examine the collateral channel in bank credit using the actual value of individual collateral. By exploiting within- firm and within-bank variations for newly issued secured loans, we find that the elasticity of collateral value to loan commitment amounts is around 0.7-0.8. This collateral value elasticity exhibits substantial country and time heterogeneity, which can be explained by legal, financial, and macro conditions. |
| Keywords: | Collateral channel, Corporate financing, Secured debt, Bank credit. |
| JEL: | E32 G21 G33 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbb:reswpp:202509-482 |
| By: | Karlye Dilts Stedman; Andrew Hanson |
| Abstract: | Using high frequency data, we find that spillovers to the U.S. yield curve from the European Central Bank increased following the Global Financial Crisis, and strengthened when the U.S. normalized policy out of sync with other advanced economies. These spillovers were amplified by a contemporaneous waning in the ”convenience” of Treasuries. This provides evidence for a portfolio balance channel of transmission that is time-varying based on the non-pecuniary characteristics of Treasuries. We rationalize these facts using a two-country model of preferred habitat investors, where time-varying price-elasticity of demand for Treasuries gives rise to time-varying spillovers. |
| Keywords: | treasuries; Convenience yield; monetary policy; international spillovers; quantitative easing; quantitative tightening; preferred habitat |
| JEL: | E44 E52 F42 G12 |
| Date: | 2025–09–04 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedkrw:101728 |
| By: | Elhanan Helpman |
| Abstract: | Foreign trade has significantly contributed to global improvements in living standards, a reduction in global inequality since the mid-1990s, and the lifting of millions out of extreme poverty. These gains were supported by the rules-based international order established after World War II. However, these achievements are now under threat. Escalating trade wars risk not only causing significant economic harm to both the United States and low-income countries, but also exacerbating geopolitical tensions. |
| JEL: | F1 F13 F15 F5 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34189 |
| By: | Wentong Chen; Mr. Fazurin Jamaludin; Florian Misch; Alex Pienkowski; Mengxue Wang; Zeju Zhu |
| Abstract: | This paper studies domestic monetary policy transmission in European countries with a significant share of lending and deposits in foreign currency, referred to as ‘euroized economies’. We find that the impact of domestic monetary policy shocks on both inflation and GDP diminishes with the degree of euroization across countries: the effects are twice as high in non-euroized countries compared to countries in our sample with the highest level of euroization. We further examine the exchange rate, credit and interest rate transmission channels, which are typically less effective in euroized economies. We show that domestic monetary policy has at best limited effects on the exchange rate. In addition, during the post-pandemic monetary tightening episodes, an increase in foreign-currency loans often softened the decline in overall credit growth, and rates of foreign-currency loans have followed the ECB policy rate rather than the domestic ones. By contrast, our analysis suggests that the pass-through to interest rates of domestic currency loans is similar across countries with different levels of euroization. |
| Keywords: | Monetary policy transmission; Euroization; Emerging markets |
| Date: | 2025–09–05 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/177 |
| By: | Koichiro Kamada (Faculty of Business and Commerce, Keio University) |
| Abstract: | This paper reviews the Bank of Japan’s (BOJ) monetary policy from the perspective of surprise observed in the foreign exchange market and investigates the potential of central bank’s surprising announcement as a policy tool to change people’s deflationary mindset. We propose a surprise measure that is based on the daily candlestick-chart data on the yen-dollar exchange rate and identify surprise that occurred in the Tokyo and New York markets. Using the identified surprise, we evaluate monetary policies of BOJ governors and compare them with those of Fed chairs. We present statistical evidence that shows that under the command of Governor Haruhiko Kuroda, the BOJ was strongly dependent on surprise policy in the course of the quantitative and qualitative monetary easing. We also show that the surprise generated during the Kuroda term succeeded in raising the trend inflation rate, but failed to steepen the slope of the Phillips curve and to enhance the pass-through of the foreign exchange rate. |
| Keywords: | deflationary mindset, monetary policy surprise, exchange rate, candlestick chart, trend inflation |
| JEL: | C54 C58 E52 E58 G15 |
| Date: | 2025–07–14 |
| URL: | https://d.repec.org/n?u=RePEc:keo:dpaper:dp2025-015 |
| By: | Renee Fry-McKibbin; Weifeng Larry Liu; Warwick J. McKibbin |
| Abstract: | Developing Asia has achieved remarkable economic growth in the last several decades but faces challenges moving from middle-income to high-income status. This paper examines the macroeconomic impacts of future productivity growth in developing Asia on the region and the world, focusing on the responses of private investment. We consider five scenarios of productivity growth driven by catch-up mechanism, with our results showing that Asia’s transition to high-income status requires continued rapid productivity growth and massive private investment. The increase in investment would significantly raise real interest rates domestically, resulting in international capital flows. Quantitatively, increased investment would be financed mainly through domestic saving, but international capital markets would also play a critical role. Productivity growth in one region generates spillover effects in others through two channels, namely international trade and capital flows. Spillover effects tend to be modestly negative in the medium term because capital flows would increase interest rates, but positive in the long term because regions with rising productivity would increase imports from other regions. Thus, competition among Asian economies and with other developing regions is not a zero-sum game as they benefit from each other in the long term. Continuous improvement in policies, institutions, and governance in developing Asia is required to achieve rapid productivity growth and to reduce the risks among economies in attracting international capital flows. Additionally, we examine two climate change scenarios and show that climate change will negatively impact productive investment and economic growth both in developing Asia and globally, as it will reduce productivity. |
| Keywords: | catch-up, macroeconomic effects, middle-income trap, population growth, global model, agriculture, manufacturing, services, G-Cubed |
| JEL: | J21 O11 O14 O41 O53 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-49 |
| By: | Bearce, David H.; Garriga, Ana Carolina |
| Abstract: | This research note reconsiders the question of whether central bank independence (CBI) and fixed exchange rates (FIX) function as substitutes or complements. We argue that these monetary institutions have neither served as substitutes nor performed as complements for either inflation control or exchange rate stability. In terms of their substitutability, our statistical evidence shows that while CBI has been used for inflation control, FIX has been more directed towards exchange rate stability using updated datasets with these monetary institutions measured both on a de jure and de facto basis with nearly global country/year coverage from 1970 to 2020. In terms of their complementarity, our results also demonstrate that CBI was not more effective at reducing inflation when paired with greater FIX and FIX was not more effective at promoting exchange rate stability when paired with greater CBI. If anything, both are less effective when paired with the other monetary institution. These results suggest a “third generation” framework for studying CBI and FIX together with a focus on macroeconomic objectives beyond just domestic price stability. |
| Keywords: | central banks; central bank independence; exchange rate regimes; inflation; exchange rate stability |
| JEL: | E02 E31 E42 E43 E58 F31 |
| Date: | 2025–08–06 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125748 |