Central Bank Award Rodrigo Gómez, 2017
In this study, Victoria Nuguer builds a small open economy model with banks and exporting firms. She observes that an increase in the foreign interest rate makes borrowing more expensive and brings the economy into a recession. When natural nonhedged firms borrow from abroad, an increase in the foreign interest rate prompts more volatility in the emerging economy than when naturally hedged firms borrow from abroad. Thus, she proposes a nonconventional policy in which the financial authority lends to nonhedged firms when foreign borrowing is more expensive. Finally, she observes that households are better-off with the policy than without it.
With the publication of the Central Bank Award Rodrigo Gómez 2017, CEMLA aims to continue contributing with the research development and seeking a better understanding of the economic phenomena that are of interested of central banking in the region.
The Federal Reserve’s Interest Rate Normalization: Does It Matter Who Borrows from Abroad in EME?
Rodrigo Gómez Award 2017
publicaTion | PDF format| size 2.22 MB
Keywords: emerging market economies, financial frictions, unconventional policy.
JEL classification: G28, E44, F42, G21. ISBN 978-607-8582-03-7 (electronic) / 978-607-8582-04-4 (print)