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Determinants of Foreign Currency Borrowing in the New Member States of the EU
Author:
Mr. Christoph B. Rosenberg
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and
Marcel Tirpák
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Series:
IMF Working Papers
Volume/Issue:
Volume 2008: Issue 173
Language:
English
Publication Date:
01 Jul 2008
DOI:
https://doi.org/10.5089/9781451870312.001
ISBN:
9781451870312
ISSN:
1018-5941
Pages:
24
Keywords:
WP; loan; exchange rate; interest rate
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The paper investigates the determinants of foreign currency borrowing by the private sector in the new member states of the European Union. We find that striking differences in patterns of foreign currency borrowing between countries are explained by the loan-to-deposit ratios, openness, and the interest rate differential. Joining the EU appears to have played an important role, by providing direct access to foreign funding, offering hedging opportunities through greater openness, lending credibility to exchange rate regimes, and raising expectations of imminent euro adoption. The empirical evidence suggests that regulatory policies to slow foreign currency borrowing have had only limited success.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2008: Issue 173