This paper tests the presence of balance sheets effects and analyzes the implications for exchange rate policies in emerging markets. The results reveal that the emerging market bond index (EMBI) is negatively related to the banks. foreign currency leverage, and that these banks. foreign...

We develop a portfolio balance model with real capital accumulation. The introduction of real capital as an asset as well as a good produced and demanded by firms enriches extant portfolio balance models of exchange rate determination. We show that expansionary monetary policy causes exchange...

Emerging market countries that have improved institutions and attained intermediate levels of institutional quality have experienced severe financial crises following capital flow reversals. However, there is also evidence that countries with strong institutions and deep capital markets are less...

This study empirically examines the effects of currency depreciation on the exporting firms' borrowing costs and exports. Using Korean data, first we find novel evidence that unanticipated currency depreciation increases the firm-level real interest rate for firms in sectors importing...

We use the Johansen cointegration approach to assess the empirical validity of the purchasing power parity (PPP) between the UK and the Euro Area, which we represent by Germany, the largest of its members. We conduct the empirical analysis in the context of the global financial crisis that began...

In a multi-country world, currencies do not move in isolation, and competitors’ exchange rate movements may help or hurt an exporting firm. Motivated by this fact, I construct a multi-country model to examine how export prices are affected by movements in own-currency and cross-currency...

We examine the effects of the terms of trade and the expected real interest rate differential on the real exchange rate in a sample of small open developed economies. We employ cointegration analysis to search for possible long-term linkages. We find that while both the terms of trade and the...

This paper examines the mean-reverting property of real exchange rates. Earlier studies have generally not been able to reject the null hypothesis of a unit-root in real exchange rates, especially for the post-Bretton Woods floating period. The results imply that long-run purchasing power parity...

Using firm level data, we report a significant fall in the exchange rate exposure of emerging market firms over the past 10 years, and relate this to higher derivatives market participation. Our methodology follows a three stage approach. First, we measure and report foreign exchange exposures...

This paper shows that the balance sheet channel of monetary transmission works mainly through U.S. bank holding companies that securitize their assets. This finding is different, in spirit, from the widely-found negative relationship between financial development and the strength of the lending...