Testing for Balance Sheet Effects in Emerging Market Countries

No 2006-28, Working papers from University of Connecticut, Department of Economics

Abstract: This paper tests the presence of balance sheets effects and analyzes the implications for exchange rate policies in emerging markets. The results reveal that the emerging market bond index (EMBI) is negatively related to the banks. foreign currency leverage, and that these banks. foreign currency exposures are relatively unhedged. Panel SVAR methods using EMBI instead of advanced country lending rates find, contrary to the literature, that the amplitude of output responses to foreign interest rate shocks are smaller under relatively fixed regimes. The findings are robust to the local projections method of obtaining impulse responses, using country specific and GARCH-SVAR models.

Keywords: EMBI; bank balance sheets; leverage; country risk premium; exchange rates. (search for similar items in EconPapers)
JEL-codes: E44 F31 F41 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2006-08
New Economics Papers: this item is included in nep-acc, nep-ban, nep-cba, nep-ifn and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2006-28

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