Topic
Local currency
About: Local currency is a research topic. Over the lifetime, 1281 publications have been published within this topic receiving 20182 citations. The topic is also known as: regional currency.
Papers published on a yearly basis
1 / 2
Papers
Posted Content•
TL;DR: The authors provide cross-country and time series evidence on the extent of exchange rate pass-through into the import prices of 25 OECD countries, and conclude that macroeconomic variables have played only a minor role in accounting for the evolution of OECD passthrough over time.
Abstract: We provide cross-country and time series evidence on the extent of exchange rate pass-through into the import prices of 25 OECD countries. Across the OECD and especially within manufacturing industries, we find compelling evidence of partial pass-through in the short run, rejecting both producer-currency pricing and local currency pricing. Over the long run, producer-currency pricing is more prevalent for many types of imported goods. We show that many countries have experienced changes in exchange rate pass-through over the past decades. While we find that countries with higher rates of exchange rate volatility are also those with higher pass-through elasticities, we also conclude that macroeconomic variables have played only a minor role in accounting for the evolution of OECD pass-through over time. Far more important for pass-through changes have been the dramatic shifts in the composition of country import bundles.
1,207 citations
TL;DR: This paper investigated global factors associated with bank capital and showed that local currency appreciation is associated with higher leverage of the banking sector, thereby providing a conceptual bridge between exchange rates and financial stability.
Abstract: We investigate global factors associated with bank capital ‡ows. We formulate a model of the international banking system where global banks interact with local banks. The solution highlights the bank leverage cycle as the determinant of the transmission of …nancial conditions across borders through banking sector capital ‡ows. A distinctive prediction of the model is that local currency appreciation is associated with higher leverage of the banking sector, thereby providing a conceptual bridge between exchange rates and …nancial stability. In a panel study of 46 countries, we …nd support for the key predictions of our model.
909 citations
TL;DR: This paper explored the hypothesis that high volatility of real and nominal exchange rates may be due to the fact that local currency pricing eliminates the pass-through from changes in exchange rates to consumer prices.
482 citations
TL;DR: Yeyati et al. as mentioned in this paper assessed the evidence on the determinants of financial dollarization and tested whether its empirical effects on monetary and financial stability and on economic performance are consistent with theoretical predictions.
Abstract: The presence in residents’ portfolio of foreign-currency assets and liabilities (or ‘financial dollarization’) has been alleged to influence monetary policy in developing economies and, especially, to cause debtors’ insolvency in the aftermath exchange rate depreciations (the ‘balance sheet effect’). The abundant and influential literature on these implications, however, contrasts sharply with the scarcity of empirical work aimed at confirming or refuting them. Using a new database, this paper assesses the evidence on the determinants of financial dollarization and tests whether its empirical effects on monetary and financial stability and on economic performance are consistent with theoretical predictions. It finds that financially dollarized economies display a more unstable demand for money, a greater propensity to suffer banking crises after a depreciation of the local currency, and slower and more volatile output growth, without significant gains in terms of domestic financial depth. The results indicate that active de-dollarization policies may be advisable for the many economies, including Central and Eastern European ones, where foreign-currency denominated assets and liabilities are important in residents’ financial portfolios.
— Eduardo Levy Yeyati
464 citations
TL;DR: The authors examined a firm's choice between local, foreign, and synthetic local currency (hedged foreign currency) debt and found evidence of unique as well as common factors that determine each debt type's use, indicating the importance of examining debt at disaggregated level.
Abstract: Using a data set of East Asian nonfinancial companies, we examine a firm's choice between local, foreign, and synthetic local currency (hedged foreign currency) debt. We find evidence of unique as well as common factors that determine each debt type's use, indicating the importance of examining debt at a disaggregated level. We exploit the Asian financial crisis as a natural experiment to investigate the role of debt type in firm performance. Surprisingly, we find that the use of synthetic local currency debt is associated with the biggest drop in market value, possibly due to currency derivative market illiquidity during the crisis
406 citations
Related Topics (5)
Performance Metrics
| Year | Papers |
|---|---|
| 2025 | 9 |
| 2024 | 9 |
| 2023 | 20 |
| 2022 | 22 |
| 2021 | 47 |
| 2020 | 71 |