ECB paper looks at impact of financial channel

Large holdings of foreign-denominated liabilities increases importance of FX moves, paper says

ECB + bridge

A foreign currency’s impact on an open economy is significantly influenced by domestic banking liabilities, a working paper published by the European Central Bank finds.

In Foreign currency exposure and the financial channel of exchange rates, Pablo Anaya Longaric examines the effects of US dollar fluctuations on small open economies. His paper focuses on the effect of movements in the dollar’s exchange rate on foreign-denominated assets and liabilities in the open economies’ banks.

He looks

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