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Impact of external currency exposures on macroeconomic policies
https://doi.org/10.32609/0042-8736-2020-8-23-40
Abstract
Based on cross-country panel regressions, the paper analyzes the impact of external currency exposures on monetary policy, exchange rate regime and capital controls. It is determined that positive net external position (which, e.g., is the case for Russia) is associated with a higher degree of monetary policy autonomy, i.e. the national key interest rate is less responsive to Fed/ECB policy and exchange rate fluctuations. Therefore, the risks of cross-country synchronization of financial cycles are reduced, while central banks are able to place a larger emphasis on their price stability mandates. Significant positive impact of net external currency exposure on exchange rate flexibility and financial account liberalization is only found in the context of static models. This is probably due to the two-way links between incentives for external assets/liabilities accumulation and these macroeconomic policy tools.
Keywords
monetary policy,
exchange rate regime,
capital controls,
currency exposures,
financial channel of exchange rates
JEL: E58, F62
About the Author
I. V. Prilepskiy
Economic Expert Group; Financial Research Institute, Ministry of Finance of the Russian Federation
Russian Federation
Moscow
Russian Federation
Moscow
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For citations:
Prilepskiy I.V. Impact of external currency exposures on macroeconomic policies. Voprosy Ekonomiki. 2020;(8):23-40. (In Russ.) https://doi.org/10.32609/0042-8736-2020-8-23-40
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