Limits of floating exchange rates: The role of foreign currency debt and import structure

Adjustment to negative price shocks by a commodity exporting economy: Does exchange rate flexibility resolve a balance of payments crisis?

“…Further, a currency depreciation raises the domestic price of imported goods, which induces expenditure switching (Equations [14] and [15]) from foreign goods to domestic goods. Towbin and Weber (2013) found that this effect of expenditure switching is stronger for countries with a small foreign currency debt and high exchange rate pass-through, which is the case for PNG, as a flexible exchange rate regime can insulate output better from a negative terms-of-trade shock compared to a fixed regime. Thus domestic industry and the government fiscal position tend to benefit from exchange rate flexibility.…”

Reserve Requirements for Price and Financial Stability - When are They Effective?

“…In contrast to the present paper, these papers do not provide an explicit evaluation regarding the gains of using reserve requirements as an additional policy instrument and how the gains vary with economic circumstances. The paper is also related to the papers which find that interest rate policy is less effective in stabilizing the economy when there is foreign currency debt (for example, Choi and Cook 2004, Elekdag and Tchakarov 2007, Towbin and Weber 2011. We complement these studies by finding that reserve requirements become more effective with foreign currency debt, in contrast to conventional monetary policy.…”

Macroeconomic effects of fiscal policy in the European Union, with particular reference to transition countries

“…In addition, the Monte Carlo analysis of several estimators by Rebucci (2003), who extends the mean group estimator to the PVAR, shows that slope hetero geneities should be very high in order to justify alternatives to pooled estimators, including PVAR FE, and that the time dimension should be longer than a typical macroeconomic data set in order to justify the use of mean group estimators. In other words, the small sample bias may be more detrimental to the mean group estimator than the slope heterogeneity bias is to the PVAR FE estimator (Towbin and Weber, 2013).…”