Financial intermediation, real exchange rates, and unconventional policies in an open economy

Luis Cespedes, Roberto Chang and Andrés Velasco

Journal of International Economics, 2017, vol. 108, issue S1, S76-S86

Abstract: We discuss unconventional policies in an open economy where financial intermediaries face occasionally binding collateral constraints. The model highlights interactions among the real exchange rate, interest rates, and financial frictions. The real exchange rate can affect international credit constraints via a net worth effect and a novel leverage ratio effect. Unconventional policies are non-neutral if financial constraints bind. Credit programs are most effective when targeted towards financial intermediaries. Sterilized interventions matter because the increased availability of tradables associated with sterilization relaxes financial frictions.

Keywords: Monetary policy; Exchange rates; Financial frictions (search for similar items in EconPapers)
JEL-codes: E5 F4 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199617300028
Full text for ScienceDirect subscribers only

Related works:
Chapter: Financial Intermediation, Real Exchange Rates, and Unconventional Policies in an Open Economy (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:108:y:2017:i:s1:p:s76-s86

DOI: 10.1016/j.jinteco.2016.12.012

Access Statistics for this article

Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and Rodríguez-Clare, Andrés

More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().