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Currency Mismatch in the Banking Sector in Latin America and the Caribbean

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  • Tobal Martín

Abstract

Existing literature uses data based on the residence principle to proxy for currency mismatch. This paper collects data on assets and liabilities broken by currency of denomination in the banking sector in Latin America and the Caribbean. I show that the information used in the literature cannot substitute for data broken down by currency and present new facts. I observe a reduction in long foreign currency positions, with several banking sectors taking short positions after 2006. Employing a methodology that accounts for time-varying unobservable characteristics, this reduction is shown to be partially explained by the implementation of prudential policies.

Suggested Citation

  • Tobal Martín, 2017. "Currency Mismatch in the Banking Sector in Latin America and the Caribbean," Working Papers 2017-05, Banco de México.
    • Handle: RePEc:bdm:wpaper:2017-05
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    Cited by:

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    2. Inmaculada Martínez‐Zarzoso & Santiago Chelala, 2020. "The impact of single windows on trade," The World Economy, Wiley Blackwell, vol. 43(10), pages 2549-2573, October.
    3. Schelling, Tan & Towbin, Pascal, 2022. "What lies beneath—Negative interest rates and bank lending," Journal of Financial Intermediation, Elsevier, vol. 51(C).
    4. Shesadri Banerjee & M S Mohanty, 2021. "US monetary policy and the financial channel of the exchange rate: evidence from India," BIS Working Papers 945, Bank for International Settlements.
    5. Hale, Galina & Juvenal, Luciana, 2023. "External Balance Sheets and the COVID-19 Crisis," Santa Cruz Department of Economics, Working Paper Series qt00p8f01t, Department of Economics, UC Santa Cruz.
    6. Hale, Galina & Juvenal, Luciana, 2023. "External Balance Sheets and the COVID-19 Crisis," Journal of Banking & Finance, Elsevier, vol. 147(C).
    7. Bitar, Joseph, 2021. "Foreign Currency Intermediation: Systemic Risk and Macroprudential Regulation," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 2(2).
    8. María Alejandra Amado, 2022. "Macroprudential FX Regulations: Sacrificing Small Firms for Stability?," Working Papers 2236, Banco de España.
    9. Gutierrez, Bryan & Ivashina, Victoria & Salomao, Juliana, 2023. "Why is dollar debt Cheaper? Evidence from Peru," Journal of Financial Economics, Elsevier, vol. 148(3), pages 245-272.
    10. Hari Venkatesh & Gourishankar S Hiremath, 2020. "Currency Mismatches In Emerging Market Economies: Is Winter Coming?," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 23(1), pages 25-54, April.
    11. Scott Regifère MOUANDAT, 2022. "Asymétrie des Monnaies : Quel Effet sur la Dette Publique des pays membres de la CEMAC ?," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 13(1), pages 62-83, June.

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    More about this item

    Keywords

    currency mismatch; prudential regulation; foreign currency risk; dollarization; synthetic control method;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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