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Real exchange rate volatility and business cycles in emerging market economies

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  • Gumus, Inci
  • Taşpınar, Zeren Tatar

Abstract

This paper analyzes how real exchange rate volatility affects business cycles through the cost of foreign currency borrowing. The results show that output volatility increases by up to 22% as the share foreign-denominated debt increases from 0 to 100%.

Suggested Citation

  • Gumus, Inci & Taşpınar, Zeren Tatar, 2015. "Real exchange rate volatility and business cycles in emerging market economies," Economics Letters, Elsevier, vol. 134(C), pages 127-129.
    • Handle: RePEc:eee:ecolet:v:134:y:2015:i:c:p:127-129
    DOI: 10.1016/j.econlet.2015.07.011
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    References listed on IDEAS

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    1. Ricardo J. Caballero & Arvind Krishnamurthy, 2003. "Excessive Dollar Debt: Financial Development and Underinsurance," Journal of Finance, American Finance Association, vol. 58(2), pages 867-893, April.
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    3. Paul Krugman, 1999. "Balance Sheets, the Transfer Problem, and Financial Crises," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(4), pages 459-472, November.
    4. Neumeyer, Pablo A. & Perri, Fabrizio, 2005. "Business cycles in emerging economies: the role of interest rates," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 345-380, March.
    5. Sosa-Padilla, César, 2018. "Sovereign defaults and banking crises," Journal of Monetary Economics, Elsevier, vol. 99(C), pages 88-105.
    6. Gumus, Inci, 2013. "Debt Denomination And Default Risk In Emerging Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 17(5), pages 1070-1095, July.
    7. Ricardo J. Caballero & Arvind Krishnamurthy, 2003. "Excessive Dollar Debt: Financial Development and Underinsurance," Journal of Finance, American Finance Association, vol. 58(2), pages 867-894, April.
    8. Tiryaki S. Tolga, 2012. "Interest Rates and Real Business Cycles in Emerging Markets," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-30, January.
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    Citations

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    Cited by:

    1. Alper Gormus, N., 2016. "Do different time-horizons in volatility have any significance for the emerging markets?," Economics Letters, Elsevier, vol. 145(C), pages 29-32.
    2. Charline Uwilingiyimana & Abdou Kâ Diongue, 2020. "Rwanda Currency Market Risk Analysis: Evidence From Asymmetry Effects," Journal of Statistical and Econometric Methods, SCIENPRESS Ltd, vol. 9(2), pages 1-2.
    3. Tule, Moses & Dogo, Mela & Uzonwanne, Godfrey, 2018. "Volatility of stock market returns and the naira exchange rate," Global Finance Journal, Elsevier, vol. 35(C), pages 97-105.
    4. Dantas Guimarães, Silvana & Ferreira Tiryaki, Gisele, 2020. "The impact of population aging on business cycles volatility: International evidence," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).

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    More about this item

    Keywords

    Real exchange rate; Denomination of debt; Business cycles;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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