Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Emerging markets (EMs) often respond to shocks by intervening in foreign exchange (FX) markets and thus preventing full exchange rate adjustment. This response can serve to dampen the effect of shocks and increase monetary policy space but may also incentivize economic participants to increase risk taking and take on more FX debt. This paper empirically analyzes the role of exchange rate flexibility in affecting such risk taking, by using rolling correlations and difference-in-difference estimations. The results suggest that a shift towards greater exchange rate flexibility often coincides with a decline in external FX debt. The findings also highlight the importance of using complementary policies to deal with financial stability issues related to the exchange rate, such as FX-specific macroprudential policies and policies aimed at promoting financial development.

Exports and Imports --- Foreign Exchange --- Monetary Policy --- Central Banks and Their Policies --- International Lending and Debt Problems --- Macroeconomic Aspects of International Trade and Finance: General --- Development Planning and Policy: Trade Policy --- Factor Movement --- Foreign Exchange Policy --- Currency --- Foreign exchange --- International economics --- Exchange rate flexibility --- Exchange rate arrangements --- External debt --- Exchange rates --- Debts, External --- Chile

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

This paper analyzes the legal foundations of central bank digital currency (CBDC) under central bank and monetary law. Absent strong legal foundations, the issuance of CBDC poses legal, financial and reputational risks for central banks. While the appropriate design of the legal framework will up to a degree depend on the design features of the CBDC, some general conclusions can be made. First, most central bank laws do not currently authorize the issuance of CBDC to the general public. Second, from a monetary law perspective, it is not evident that “currency” status can be attributed to CBDC. While the central bank law issue can be solved through rather straithforward law reform, the monetary law issue poses fundmental legal policy challenges.

Business and Economics --- Banks and Banking --- Finance: General --- Money and Monetary Policy --- Public Finance --- Industries: Financial Services --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Monetary Policy --- Central Banks and Their Policies --- Remittances --- International Monetary Arrangements and Institutions --- Development Planning and Policy: Trade Policy --- Factor Movement --- Foreign Exchange Policy --- Technological Change: Choices and Consequences --- Diffusion Processes --- Taxation, Subsidies, and Revenue: General --- Distributed ledgers --- Monetary economics --- Banking --- Public finance & taxation --- Finance --- Central Bank digital currencies --- Currencies --- Central bank legislation --- Legal support in revenue administration --- Payment systems --- Technology --- Money --- Central banks --- Revenue administration --- Financial markets --- Financial services industry --- Technological innovations --- Revenue --- Clearinghouses --- Canada --- Construction industry.

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

The consequences of large depreciations on economic activity depend on the relative strength of the contractionary balance sheet and expansionary expenditure switching effects. However, the two operate over different time horizons: the balance sheet effect hits almost immediately, while expenditure switching is delayed by nominal rigidities and other frictions. The paper hypothesizes that the overshooting phase—observed early in the depreciation episode and driven by the balance sheet effect—is largely irrelevant for expenditure switching, which is more closely aligned with ex-post equilibrium depreciation. Given this, larger real exchange rate overshooting should signal a relatively stronger balance sheet effect. Empirical findings support this hypothesis: (i) overshooting is driven by factors associated with the balance sheet effect (high external debt, low reserves, low trade openness), (ii) overshooting-based measures of the balance sheet effect foreshadow post-depreciation output losses, and (iii) the balance sheet effect is strongest early on, while expenditure switching strengthens over the medium term.

Accounting --- Exports and Imports --- Finance: General --- Foreign Exchange --- Investments: General --- Current Account Adjustment --- Short-term Capital Movements --- International Lending and Debt Problems --- Economic Growth of Open Economies --- International Financial Markets --- Development Planning and Policy: Trade Policy --- Factor Movement --- Foreign Exchange Policy --- Investment --- Capital --- Intangible Capital --- Capacity --- Public Administration --- Public Sector Accounting and Audits --- General Financial Markets: Government Policy and Regulation --- Macroeconomics --- Financial reporting, financial statements --- International economics --- Finance --- Currency --- Foreign exchange --- Depreciation --- Financial statements --- External debt --- Currency mismatches --- Exchange rates --- National accounts --- Public financial management (PFM) --- Financial sector policy and analysis --- Saving and investment --- Finance, Public --- Debts, External --- Financial risk management --- United States