The Foreign Currency Fisher Channel: Evidence from Households

Győző Gyöngyösi, Judit Rariga and Emil Verner

No 34234, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study how foreign currency debt exposure shapes household adjustment to a large exchange rate depreciation. Using household survey and bank customer data during Hungary's 2008 currency crisis, we find that foreign currency borrowers cut consumption one-for-one with increased debt service, consistent with a foreign currency Fisher channel. Both the quantity and quality of expenditures decline, indicating a "flight from quality." Debt revaluation has a limited effect on overall labor supply, but there is substitution toward foreign income and home production. Our findings point to the relevance of open-economy models with incomplete markets, heterogeneous foreign currency exposures, and liquidity constraints.

JEL-codes: D12 E20 E3 F3 F30 F31 F34 G01 G5 G51 (search for similar items in EconPapers)
Date: 2025-09
New Economics Papers: this item is included in nep-ifn and nep-mon
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