Georgios Georgiadis (European Central bank) will present the research paper "Foreign-currency exposures and the financial channel of exchange rates". Foreign-currency exposures on an economy’s external balance sheet may jeopardise financial stability when the exchange rate depreciates. The author explores whether there is evidence of "fear-of-floating" in small open economies facing trade-off between financial stability and macroeconomic stabilization.
Findings suggest that this fear-of-floating is particularly pronounced in the presence of foreign-currency exposures. Firstly, fear-of-floating is stronger when the foreign-currency exposures arise through debt instruments. Secondly, the evidence for fear-of-floating is stronger when large open economy monetary policy is tightened, suggesting that fear-of-floating typically arises in the face of immediate threats to financial stability due to depreciation pressures in the presence of foreign-currency exposures.
Details: https://nbu.my.webex.com/nbu.my/j.php?MTID=m5534177539f1bb673fb34a68c3913ac9
(Meeting number: 163 658 4781, Password: 3TTuyFy7sM7 (38889397 from phones and video systems).