Topic
Currency
About: Currency is a research topic. Over the lifetime, 26697 publications have been published within this topic receiving 485370 citations. The topic is also known as: monetary unit & unit of money.
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TL;DR: In this article, the authors provide evidence on the susceptibility of different types of exchange rate regimes to currency crises during 1990-2001 and explore the incidence of crises, identified as episodes of severe exchange market pressure, to seek evidence on whether pegged regimes are more crisis prone than floating regimes.
Abstract: This paper provides evidence on the susceptibility of different types of exchange rate regimes to currency crises during 1990-2001. It explores the incidence of crises, identified as episodes of severe exchange market pressure, to seek evidence on whether pegged regimes are more crisis prone than floating regimes and on whether certain types of pegged regimes are more crisis prone than others. The paper finds that pegged regimes, as a whole, have been characterized by a higher incidence of crises than floating regimes, for countries that are more integrated with international capital markets; and that intermediate regimes (mainly soft pegs and tightly-managed floating regimes) have been more crisis prone than both hard pegs and other floating regimesa view consistent with the bipolar view of exchange rate regimes. The degree of crisis proneness seems to be broadly similar across different types of intermediate regimes.
105 citations
TL;DR: In this article, the authors studied the behavior of foreign currency borrowing, maturity, sales and investment decisions of firms listed in the Chilean Stock Exchange from 1994 to 2001, assessing whether in the aftermath of the Asian crisis of the late 1990s the depreciation of the local currency (Chilean peso) affected these firms’ real and financial decisions.
105 citations
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TL;DR: In this article, the authors focus on the different historical regime experiences of the core and the periphery and find that the financial integration observed for the recent period is truly an advanced country phenomenon, suggesting that the causality goes from globalization to the exchange rate regime rather than the other way round.
Abstract: In this Paper we focus on the different historical regime experiences of the core and the periphery. Using conventional Feldstein-Horioka tests, but taking a more careful look at the panel properties of our sample, this Paper reports results which are consistent with the ‘Folk’ wisdom that financial integration was as high before 1914 as it is today. But the evidence suggests that it was not the exchange rate regime followed that mattered for deeper integration but the presence of capital controls. Moreover, we find that the financial integration observed for the recent period is truly an advanced country phenomenon, suggesting that the causality goes from globalization to the exchange rate regime rather than the other way round. We develop this intuition by showing that before 1914, advanced countries adhered to gold while periphery countries either emulated the advanced countries or floated. Some peripheral countries were especially vulnerable to financial crises and debt default in large part because of their extensive external debt obligations denominated in core country currencies. This left them with the difficult choice of floating but restricting external borrowing or devoting considerable resources to maintaining an extra hard peg. Today while advanced countries can successfully float, emergers, who are less financially mature and must borrow abroad in terms of advanced country currencies, are afraid to float for the same reason as their 19th century forbearers. To obtain access to foreign capital they may need a hard peg to the core country currencies, or else can resort to capital controls. Thus the key distinction between the exchange rate regime of core and periphery countries both then and now that we emphasize in this Paper is financial maturity, evidenced in the ability to issue international securities denominated in domestic currency.
105 citations
TL;DR: In this paper, the importance of heterogeneous beliefs for the dynamics of asset prices was studied in currency markets, where the absence of short-selling constraints allows to perform sharper tests of theoretical predictions.
105 citations
TL;DR: In this article, the authors proposed that trade and direct investment interdependence relate to dyadic BSA cooperation via two mechanisms: financing insulation from international liquidity shocks and reduced transaction costs of cross-border exchange for local firms.
Abstract: For several years now, China has implemented policies to promote the international use of its national currency, the Renminbi (RMB). As part of these efforts, the People's Bank of China (PBC) has negotiated 25 bilateral currency swap agreements (BSAs) with foreign central banks. These make it easier for firms in both China and its partner countries to settle cross-border trade and direct investment in RMB. We seek to explain why China and these countries cooperate via BSAs. We theorize that trade and direct investment interdependence relate to dyadic BSA cooperation via two mechanisms: financing insulation from international liquidity shocks and reduced transaction costs of cross-border exchange for local firms. Additionally, we expect the presence of preferential trade agreements (PTAs) and bilateral investment treaties (BITs) will increase the probability of dyadic BSA cooperation. BSAs are natural extensions of these existing agreements. They represent an additional layer of state-level formal cooperation that further reduces barriers to cross-border trade and direct investment. Our empirical analysis finds that both de facto trade interdependence and de jure economic integration via PTAs and BITs increase the probability of BSA cooperation between China and partners.
105 citations