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Foreign Currency Borrowing: The Case of Hungary

  • Gábor Pellényi
  • Péter Bilek
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    We use household survey data from Hungary to analyse the determinants of foreign currency (FX) borrowing. We do not find evidence that Hungarian FX borrowers are better educated, wealthier or more risk-loving than their peers. In fact, FX borrowing is a common phenomenon driven mostly by macroeconomic factors: high interest rate spreads, a relatively stable exchange rate and the competition of foreign owned banks. Although FX borrowing is widespread, our analysis suggests that loan losses directly attributed to it may be limited, given currency fluctuations up to autumn 2009.

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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.412908.de/diw_finess_05040.pdf
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    Paper provided by DIW Berlin, German Institute for Economic Research in its series Working Paper / FINESS with number 5.4.

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    Length: 17 p.
    Date of creation: 2009
    Date of revision:
    Handle: RePEc:diw:diwfin:diwfin5.4
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    1. Christian Broda & Eduardo Levy Yeyati, 2003. "Endogenous Deposit Dollarization," Business School Working Papers dieciseis, Universidad Torcuato Di Tella.
    2. Ize, Alain & Yeyati, Eduardo Levy, 2003. "Financial dollarization," Journal of International Economics, Elsevier, vol. 59(2), pages 323-347, March.
    3. Beer, Christian & Ongena, Steven & Peter, Marcel, 2010. "Borrowing in foreign currency: Austrian households as carry traders," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2198-2211, September.
    4. Cowan, kevin & Quy-Toan Do, 2003. "Financial dollarization and central bank credibility," Policy Research Working Paper Series 3082, The World Bank.
    5. Christoph B. Rosenberg & Marcel Tirpák, 2008. "Determinants of Foreign Currency Borrowing in the New Member States of the EU," IMF Working Papers 08/173, International Monetary Fund.
    6. Eduardo Levy Yeyati, 2003. "Financial Dedollarization: A Carrot and Stick Approach," Business School Working Papers nueve, Universidad Torcuato Di Tella.
    7. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
    8. Olivier Jeanne, 2003. "Why Do Emerging Economies Borrow in Foreign Currency?," IMF Working Papers 03/177, International Monetary Fund.
    9. Basso, Henrique S. & Calvo-Gonzalez, Oscar & Jurgilas, Marius, 2007. "Financial dollarization: the role of banks and interest rates," Working Paper Series 0748, European Central Bank.
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