Currency mismatch, systemic risk and growth in emerging Europe
Abstract"Currency mismatch is a vehicle that exposes the economy to systemic risk, but it is also an engine of growth. We analyse this dual role at the macro and the micro levels. At the aggregate level, we construct a new measure of currency mismatch in the banking sector that controls for bank lending to unhedged borrowers - that is, those with no foreign currency income. Using our measure, we find that across emerging European economies, increases in currency mismatch are associated with higher growth in tranquil times, but also with more severe crises. On net, after taking into account the crisis period, we find a positive link between currency mismatch and growth. These results are also confirmed for a broader sample of emerging economies. In our firm-level analysis, we find that in emerging Europe, currency mismatch relaxes borrowing constraints, reduces interest rates and enhances growth across sets of firms that arguably are the most credit constrained - that is, small firms in non-tradables sectors - but not across large firms. An advantage of our approach is that it considers both listed and non-listed firms, and so we are able to effectively capture the effects of currency mismatch across the entire economy, not just the financially privileged stock market listed firms." Copyright (c) CEPR, CES, MSH, 2010.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by CEPR & CES & MSH in its journal Economic Policy.
Volume (Year): 25 (2010)
Issue (Month): (October)
Contact details of provider:
Postal: 2nd Floor, 53-56 Great Sutton Street, London EC1V 0DG
Phone: +44 (0)20 7183 8801
Fax: +44 (0)20 7183 8820
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0266-4658
More information through EDIRC
Postal: Schackstr. 4, 80539 Munich
Phone: +49 (89) 2180-2748
Fax: +49 (89) 39 73 03
Web page: http://www.cesifo-group.de/portal/page/portal/ifoHome/f-about/f2aboutces
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Romain Ranciere & Aaron Tornell & Athanasios Vamvakidis, 2010.
"A New Index of Currency Mismatch and Systemic Risk,"
IMF Working Papers
10/263, International Monetary Fund.
- Rancière, Romain & Tornell, Aaron & Vamvakidis, Athanasios, 2011. "A New Index of Currency Mismatch and Systemic Risk," CEPR Discussion Papers 8250, C.E.P.R. Discussion Papers.
- Mariann Endrész & Gyõzõ Gyöngyösi & Péter Harasztosi, 2012. "Currency mismatch and the sub-prime crisis: firm-level stylised facts from Hungary," MNB Working Papers 2012/8, Magyar Nemzeti Bank (the central bank of Hungary).
- PIROVANO, Mara, 2013.
"Household and firm leverage, capital flows and monetary policy in a small open economy,"
2013014, University of Antwerp, Faculty of Applied Economics.
- Mara Pirovano, 2013. "Household and firm leverage, capital flows and monetary policy in a small open economy," Working Paper Research 246, National Bank of Belgium.
- Aron Gereben & Ferenc Karvalits & Zalan Kocsis, 2011. "Monetary policy challenges during the crisis in a small open dollarised economy: the case of Hungary," BIS Papers chapters, in: Bank for International Settlements (ed.), Capital flows, commodity price movements and foreign exchange intervention, volume 57, pages 179-188 Bank for International Settlements.
- Wagner, Charlotte, 2010. "From boom to bust: how different has microfinance been from traditional banking?," Frankfurt School - Working Paper Series 156, Frankfurt School of Finance and Management.
- Hake, Mariya & Stix, Helmut & Fidrmuc, Jarko, 2011.
"Households’ Foreign Currency Borrowing in Central and Eastern Europe,"
171, Oesterreichische Nationalbank (Austrian Central Bank).
- Fidrmuc, Jarko & Hake, Mariya & Stix, Helmut, 2013. "Households’ foreign currency borrowing in Central and Eastern Europe," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 1880-1897.
- Rudiger Ahrend & Antoine Goujard, 2012. "International Capital Mobility and Financial Fragility - Part 1. Drivers of Systemic Banking Crises: The Role of Bank-Balance-Sheet Contagion and Financial Account Structure," OECD Economics Department Working Papers 902, OECD Publishing.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.