The Dominant Currency Financing Channel of External Adjustment

The Dominant Currency Financing Channel of External Adjustment
Author :
Publisher : International Monetary Fund
Total Pages : 81
Release :
ISBN-10 : 9798400248788
ISBN-13 :
Rating : 4/5 ( Downloads)

Book Synopsis The Dominant Currency Financing Channel of External Adjustment by : Camila Casas

Download or read book The Dominant Currency Financing Channel of External Adjustment written by Camila Casas and published by International Monetary Fund. This book was released on 2023-08-11 with total page 81 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide evidence of a new channel through which exchange rates affect trade. Using a novel identification strategy that exploits firms’ maturity structure of foreign currency debt around a large depreciation in Colombia, we show that firms experiencing a stronger debt revaluation of dominant currency debt due to a home currency depreciation compress imports relatively more while exports are unaffected. Dominant currency financing does not lead to an import compression for firms that export, hold foreign currency assets, or are active in the foreign exchange derivatives markets, as they are all hedged against a revaluation of their debt. These findings can be rationalized through the prism of a model with costly state verification and foreign currency borrowing. Quantitatively, the dominant currency financing channel explains a significant part of the external adjustment process in addition to the expenditure switching channel. Pricing exports in the dominant currency, instead of the producer’s currency, mutes the effect of dominant currency financing on trade flows.


The Dominant Currency Financing Channel of External Adjustment Related Books

The Dominant Currency Financing Channel of External Adjustment
Language: en
Pages: 81
Authors: Camila Casas
Categories: Business & Economics
Type: BOOK - Published: 2023-08-11 - Publisher: International Monetary Fund

GET EBOOK

We provide evidence of a new channel through which exchange rates affect trade. Using a novel identification strategy that exploits firms’ maturity structure
Dominant Currencies and External Adjustment
Language: en
Pages: 46
Authors: Gustavo Adler
Categories: Business & Economics
Type: BOOK - Published: 2020-07-20 - Publisher: International Monetary Fund

GET EBOOK

The extensive use of the US dollar when firms set prices for international trade (dubbed dominant currency pricing) and in their funding (dominant currency fina
Dominant Currency Paradigm: A New Model for Small Open Economies
Language: en
Pages: 62
Authors: Camila Casas
Categories: Business & Economics
Type: BOOK - Published: 2017-11-22 - Publisher: International Monetary Fund

GET EBOOK

Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in
External Adjustment
Language: en
Pages: 64
Authors: Maurice Obstfeld
Categories: Balance of trade
Type: BOOK - Published: 2004 - Publisher:

GET EBOOK

"Gross stocks of foreign assets have increased rapidly relative to national outputs since 1990, and the short-run capital gains and losses on those assets can a
The External Balance Assessment (EBA) Methodology
Language: en
Pages: 68
Authors: Mr.Steven Phillips
Categories: Business & Economics
Type: BOOK - Published: 2014-01-13 - Publisher: International Monetary Fund

GET EBOOK

The External Balance Assessment (EBA) methodology has been developed by the IMF’s Research Department as a successor to the CGER methodology for assessing cur