Exchange rate reaction to international organization loans and geopolitical preferences

Hugo Oriola () and Jamel Saadaoui
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Hugo Oriola: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: This research provides novel empirical evidence about the exchange rate reaction to international organization loans and geopolitical preferences using an unbalanced panel of 153 countries observed from February 1993 to December 2019. For elected temporary members of the UN Security Council, the International Monetary Fund (IMF) loans cause a sizeable appreciation in the exchange rate vis-à-vis the USD of around 2 percent at the 12-month horizon, after controlling for institutional quality. Asian Development Bank (ADB) loans cause an appreciation of around 0.25 percent at the 4-month horizon. These effects are stronger when the geopolitical distance with China is higher, indicating a higher credibility for these loans.

Keywords: Exchange rates; Geopolitical preferences; International organization loans; Institutional quality; Local projections (search for similar items in EconPapers)
Date: 2025-01
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Published in Economics Letters, 2025, 248, pp.112212. ⟨10.1016/j.econlet.2025.112212⟩

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Journal Article: Exchange rate reaction to international organization loans and geopolitical preferences (2025)
Working Paper: Exchange rate reaction to international organization loans and geopolitical preferences (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04924977

DOI: 10.1016/j.econlet.2025.112212

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