Chen, Zefeng; Nadeem, Sanaa; Peiris, Shanaka - 2021
by banks and investment. For example, a capital outflow shock leads to a deprecation that reduces the net worth and … intermediation capacity of banks exposed to foreign currency liabilities. In such cases, the exchange rate acts as shock amplifier … exchange rate serves as a shock absorber, and any FXI that weakens that function can be costly. We also explore the …