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Determinants of Foreign Currency Borrowing in the New Member States of the EU

Author/Editor: Rosenberg, Christoph B. | Tirpák, Marcel
Authorized for Distribution: July 1, 2008
Electronic Access: Free Full Text (PDF file size is 655KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: 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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Series: Working Paper No. 08/173
Subject(s): Europe | European Union | External borrowing | Private sector | Foreign investment | Exchange rate regimes | Euro
Author's keyword(s): Foreign currency borrowing | new EU member states | Central and Eastern Europe
 
English  
    Published:   July 1, 2008        
            Format:   Paper
    Stock No:   WPIEA2008173   Pages:   24
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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