Pub Date : 2025-08-09DOI: 10.1016/j.jimonfin.2025.103403
Kai Arvai , Ricardo Duque Gabriel
This paper argues that the exchange rate regime matters for inflation and economic activity, with substantial benefits arising from a currency peg. At the heart of these benefits lies an increase in credibility that reduces the inflationary bias once central banks commit to pegging their currency to a credible anchor. Using an open economy model, we provide a credibility estimate for 170 economies for 1950–2019 which aligns with other central bank independence measures. We document that committing to a peg persistently lowers inflation and its volatility while increasing real economic growth. Less credible countries benefit more from fixing the exchange rate.
{"title":"Gains from commitment: The case for pegging the exchange rate","authors":"Kai Arvai , Ricardo Duque Gabriel","doi":"10.1016/j.jimonfin.2025.103403","DOIUrl":"10.1016/j.jimonfin.2025.103403","url":null,"abstract":"<div><div>This paper argues that the exchange rate regime matters for inflation and economic activity, with substantial benefits arising from a currency peg. At the heart of these benefits lies an increase in credibility that reduces the inflationary bias once central banks commit to pegging their currency to a credible anchor. Using an open economy model, we provide a credibility estimate for 170 economies for 1950–2019 which aligns with other central bank independence measures. We document that committing to a peg persistently lowers inflation and its volatility while increasing real economic growth. Less credible countries benefit more from fixing the exchange rate.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"158 ","pages":"Article 103403"},"PeriodicalIF":3.3,"publicationDate":"2025-08-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144842685","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-06DOI: 10.1016/j.jimonfin.2025.103401
Jean-Charles Bricongne , Louis Marolleau
We investigate the immediate impact of monetary policy surprises on exchange rates by using a text indicator to detect them. A textual analysis method is applied to 746 business press articles. A database of monetary policy decisions is thus created. This database contains 510 decisions communicated between 2018 and 2023 for 11 countries with floating exchange rates and includes 78 surprises. To identify a causal effect, the impact of surprises on exchange rates is captured the minute the decision is communicated. This is done using high-frequency data. The amplitudes of exchange rate variations for surprises are compared with decisions qualified as “expected”. The results show that, compared to expected decisions, monetary surprises increase the amplitudes of minute-to-minute variations at the communication time by 0.19 percentage point (p.p.) up to 0.39p.p. In order of magnitude, the amplitudes of minute-to-minute variations for monetary surprises are 100 to 1,000 times greater than the median ones calculated over a year for the currencies in the database. Due to demand effects, appreciation and depreciation of currencies are immediate in the currency market following macroeconomic announcements.
{"title":"The impact of monetary surprises on exchange rates: Results from textual and high-frequency analysis","authors":"Jean-Charles Bricongne , Louis Marolleau","doi":"10.1016/j.jimonfin.2025.103401","DOIUrl":"10.1016/j.jimonfin.2025.103401","url":null,"abstract":"<div><div>We investigate the immediate impact of monetary policy surprises on exchange rates by using a text indicator to detect them. A textual analysis method is applied to 746 business press articles. A database of monetary policy decisions is thus created. This database contains 510 decisions communicated between 2018 and 2023 for 11 countries with floating exchange rates and includes 78 surprises. To identify a causal effect, the impact of surprises on exchange rates is captured the minute the decision is communicated. This is done using high-frequency data. The amplitudes of exchange rate variations for surprises are compared with decisions qualified as “expected”. The results show that, compared to expected decisions, monetary surprises increase the amplitudes of minute-to-minute variations at the communication time by 0.19 percentage point (p.p.) up to 0.39p.p. In order of magnitude, the amplitudes of minute-to-minute variations for monetary surprises are 100 to 1,000 times greater than the median ones calculated over a year for the currencies in the database. Due to demand effects, appreciation and depreciation of currencies are immediate in the currency market following macroeconomic announcements.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"158 ","pages":"Article 103401"},"PeriodicalIF":3.3,"publicationDate":"2025-08-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144890419","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-05DOI: 10.1016/j.jimonfin.2025.103400
Stefan Avdjiev , John Burger , Bryan Hardy
It is well-known that dollar credit to emerging market (EM) corporates has expanded dramatically in the past two decades. However, the concurrent expansion of local currency credit, facilitated by more developed domestic financial systems, has been less recognized. This paper first uses data on EM corporates’ borrowing through bonds and syndicated loans to show the considerable rise of their local currency debt. It then utilizes comprehensive firm-level data to document that EM corporates’ local currency borrowing can offset shocks to their dollar debt, and how this varies across firms and countries. A broad dollar appreciation is associated with a decline in credit to ‘’local’’ firms (smaller, non-exporting, with low profitability) but has no significant impact on ‘’global’’ firms (larger, exporting, highly profitable). Firms in the mid-range (of these dimensions) see lower dollar debt in response to a stronger dollar, but replace it with local currency debt, thus offsetting the shock.
{"title":"New spare tires: local currency credit as a global shock absorber","authors":"Stefan Avdjiev , John Burger , Bryan Hardy","doi":"10.1016/j.jimonfin.2025.103400","DOIUrl":"10.1016/j.jimonfin.2025.103400","url":null,"abstract":"<div><div>It is well-known that dollar credit to emerging market (EM) corporates has expanded dramatically in the past two decades. However, the concurrent expansion of local currency credit, facilitated by more developed domestic financial systems, has been less recognized. This paper first uses data on EM corporates’ borrowing through bonds and syndicated loans to show the considerable rise of their local currency debt. It then utilizes comprehensive firm-level data to document that EM corporates’ local currency borrowing can offset shocks to their dollar debt, and how this varies across firms and countries. A broad dollar appreciation is associated with a decline in credit to ‘’local’’ firms (smaller, non-exporting, with low profitability) but has no significant impact on ‘’global’’ firms (larger, exporting, highly profitable). Firms in the mid-range (of these dimensions) see lower dollar debt in response to a stronger dollar, but replace it with local currency debt, thus offsetting the shock.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"158 ","pages":"Article 103400"},"PeriodicalIF":3.3,"publicationDate":"2025-08-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144826906","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-01DOI: 10.1016/j.jimonfin.2025.103397
Anh Thi-Ngoc Nguyen, Ha Minh Nguyen
This paper investigates the impact of disasters caused by natural hazards on exchange rate movements in different country groups with different exchange rate regimes. Using a panel local projection model with a high-frequency monthly dataset of 177 countries during 1970M1–2019M12, we find that exchange rate movements are more sensitive to disasters in emerging markets and developing countries (EMDEs) than in advanced economies (AEs). Furthermore, exchange rate reactions to natural shocks depend on exchange rate regimes adopted by EMDEs. On average, both nominal and real exchange rates could depreciate up to 6 percent two years after the disasters in non-pegged regimes. Our findings suggest that EMDEs with flexible exchange rate regimes could observe a faster recovery through nominal and real depreciations, although they should be mindful about policy implications that may arise from large exchange rate fluctuations caused by disaster shocks.
{"title":"Currencies in turbulence: exploring the impact of natural disasters on exchange rates","authors":"Anh Thi-Ngoc Nguyen, Ha Minh Nguyen","doi":"10.1016/j.jimonfin.2025.103397","DOIUrl":"10.1016/j.jimonfin.2025.103397","url":null,"abstract":"<div><div>This paper investigates the impact of disasters caused by natural hazards on exchange rate movements in different country groups with different exchange rate regimes. Using a panel local projection model with a high-frequency monthly dataset of 177 countries during 1970M1–2019M12, we find that exchange rate movements are more sensitive to disasters in emerging markets and developing countries (EMDEs) than in advanced economies (AEs). Furthermore, exchange rate reactions to natural shocks depend on exchange rate regimes adopted by EMDEs. On average, both nominal and real exchange rates could depreciate up to 6 percent two years after the disasters in non-pegged regimes. Our findings suggest that EMDEs with flexible exchange rate regimes could observe a faster recovery through nominal and real depreciations, although they should be mindful about policy implications that may arise from large exchange rate fluctuations caused by disaster shocks.</div><div>JEL Classification Numbers: F31, Q54.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"157 ","pages":"Article 103397"},"PeriodicalIF":3.3,"publicationDate":"2025-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144781458","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-01DOI: 10.1016/j.jimonfin.2025.103396
Florian Perusset , Michael Rockinger
In this paper, we show how the inclusion of structured products affects the performance of a portfolio of primary assets. We consider fairly priced, synthetic structured products (convertible bonds, reverse convertibles, or barrier reverse convertibles) that we include in a 60/40 portfolio (60 % stocks and 40 % bonds), a typical portfolio held by institutional investors. We demonstrate that including structured products in the 60/40 portfolio generally lowers returns and risk-adjusted performance across all product types. Moreover, we evaluate the opportunity costs – in terms of utility – of including structured products in the 60/40 portfolio. We demonstrate that the opportunity cost is overwhelmingly negative, implying that investors who choose to include structured products in their portfolios suffer from a disutility. Our findings are robust to alternative settings. We expect further performance deterioration for real-world structured products that are highly illiquid, exhibit high transaction costs, and are often more complex than the products we are considering.
{"title":"Do structured products improve portfolio performance? A backtesting exercise","authors":"Florian Perusset , Michael Rockinger","doi":"10.1016/j.jimonfin.2025.103396","DOIUrl":"10.1016/j.jimonfin.2025.103396","url":null,"abstract":"<div><div>In this paper, we show how the inclusion of structured products affects the performance of a portfolio of primary assets. We consider fairly priced, synthetic structured products (convertible bonds, reverse convertibles, or barrier reverse convertibles) that we include in a 60/40 portfolio (60 % stocks and 40 % bonds), a typical portfolio held by institutional investors. We demonstrate that including structured products in the 60/40 portfolio generally lowers returns and risk-adjusted performance across all product types. Moreover, we evaluate the opportunity costs – in terms of utility – of including structured products in the 60/40 portfolio. We demonstrate that the opportunity cost is overwhelmingly negative, implying that investors who choose to include structured products in their portfolios suffer from a disutility. Our findings are robust to alternative settings. We expect further performance deterioration for real-world structured products that are highly illiquid, exhibit high transaction costs, and are often more complex than the products we are considering.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"157 ","pages":"Article 103396"},"PeriodicalIF":3.3,"publicationDate":"2025-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144748991","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-01DOI: 10.1016/j.jimonfin.2025.103398
Michał Rubaszek , Karol Szafranek , Gazi Salah Uddin
We quantify intraday volatility connectedness between major currencies and assess how it is related to various uncertainty measures. For that purpose, we integrate the well-known Diebold-Yilmaz spillover methodology with a TVP VAR model estimated on a unique, vast dataset of over 460K five-minute quotations from Jan. 1, 2018 to Feb. 29, 2024 for five most heavily traded currency pairs of USD against EUR, JPY, AUD, CAD and GBP. In contrast to existing studies, which either use data of lower sampling frequency or employ high-frequency data only to calculate daily realized moments, we use intraday data directly for model estimation. This enables us to show that volatility connectedness at intraday frequency presents a complementary picture to estimates based on daily data. Within the quantile regression framework we demonstrate that the level of total intraday connectedness is affected by the level of uncertainty proxied by the implied volatility at stock markets. Our study highlights the importance of using high-frequency data in order to better understand forex market dynamics.
{"title":"Intraday volatility connectedness on the forex market: the role of uncertainty","authors":"Michał Rubaszek , Karol Szafranek , Gazi Salah Uddin","doi":"10.1016/j.jimonfin.2025.103398","DOIUrl":"10.1016/j.jimonfin.2025.103398","url":null,"abstract":"<div><div>We quantify intraday volatility connectedness between major currencies and assess how it is related to various uncertainty measures. For that purpose, we integrate the well-known Diebold-Yilmaz spillover methodology with a TVP VAR model estimated on a unique, vast dataset of over 460K five-minute quotations from Jan. 1, 2018 to Feb. 29, 2024 for five most heavily traded currency pairs of USD against EUR, JPY, AUD, CAD and GBP. In contrast to existing studies, which either use data of lower sampling frequency or employ high-frequency data only to calculate daily realized moments, we use intraday data directly for model estimation. This enables us to show that volatility connectedness at intraday frequency presents a complementary picture to estimates based on daily data. Within the quantile regression framework we demonstrate that the level of total intraday connectedness is affected by the level of uncertainty proxied by the implied volatility at stock markets. Our study highlights the importance of using high-frequency data in order to better understand forex market dynamics.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"157 ","pages":"Article 103398"},"PeriodicalIF":3.3,"publicationDate":"2025-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144781457","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-01DOI: 10.1016/j.jimonfin.2025.103395
Gerdie Everaert , Lorenzo Pozzi
This paper examines the dynamic impact of systemic banking crises on financial development. Causal effects are identified using a propensity-score-based method for time series and panel data. Specifically, to address the non-random nature of banking crisis onsets, we apply inverse propensity score weighting to create a quasi-random distribution of crisis and non-crisis episodes. The appropriate weights are derived from a banking crisis prediction model that accounts for financial development in the run-up to crises. Using data on banking crises and a comprehensive set of financial development indicators for 174 countries from 1980 to 2019, we present novel evidence demonstrating that banking crisis shocks have a persistent negative effect on financial development. This finding holds across multiple dimensions of financial development.
{"title":"Financial development in the aftermath of banking crises","authors":"Gerdie Everaert , Lorenzo Pozzi","doi":"10.1016/j.jimonfin.2025.103395","DOIUrl":"10.1016/j.jimonfin.2025.103395","url":null,"abstract":"<div><div>This paper examines the dynamic impact of systemic banking crises on financial development. Causal effects are identified using a propensity-score-based method for time series and panel data. Specifically, to address the non-random nature of banking crisis onsets, we apply inverse propensity score weighting to create a quasi-random distribution of crisis and non-crisis episodes. The appropriate weights are derived from a banking crisis prediction model that accounts for financial development in the run-up to crises. Using data on banking crises and a comprehensive set of financial development indicators for 174 countries from 1980 to 2019, we present novel evidence demonstrating that banking crisis shocks have a persistent negative effect on financial development. This finding holds across multiple dimensions of financial development.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"157 ","pages":"Article 103395"},"PeriodicalIF":3.3,"publicationDate":"2025-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144748987","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigates how investor sentiment, captured through a novel Spotify-based mood metric, influences the cross-sectional pricing of cryptocurrencies. Drawing on behavioral finance and psychological theories, we hypothesize that emotional states reflected in musical choices influence cryptocurrency returns. Using weekly data from 2,551 cryptocurrencies over five years, we find that sensitivity to music sentiment significantly predicts future returns. Our results reveal a negative relationship between music sentiment beta and near-term returns, with multivariate regressions confirming its explanatory power beyond traditional risk factors. We also uncover nonlinear and time-varying effects, consistent with sentiment-driven mispricing and investor attention cycles. This study offers a global sentiment measure, contributing to the understanding of mood-driven dynamics in speculative markets and informing trading strategies, policy, and research.
{"title":"Listening to the Market: Music sentiment and cryptocurrency returns","authors":"Sinda Hadhri , Mehak Younus , Muhammad Abubakr Naeem , Larisa Yarovaya","doi":"10.1016/j.jimonfin.2025.103394","DOIUrl":"10.1016/j.jimonfin.2025.103394","url":null,"abstract":"<div><div>This paper investigates how investor sentiment, captured through a novel Spotify-based mood metric, influences the cross-sectional pricing of cryptocurrencies. Drawing on behavioral finance and psychological theories, we hypothesize that emotional states reflected in musical choices influence cryptocurrency returns. Using weekly data from 2,551 cryptocurrencies over five years, we find that sensitivity to music sentiment significantly predicts future returns. Our results reveal a negative relationship between music sentiment beta and near-term returns, with multivariate regressions confirming its explanatory power beyond traditional risk factors. We also uncover nonlinear and time-varying effects, consistent with sentiment-driven mispricing and investor attention cycles. This study offers a global sentiment measure, contributing to the understanding of mood-driven dynamics in speculative markets and informing trading strategies, policy, and research.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"157 ","pages":"Article 103394"},"PeriodicalIF":2.8,"publicationDate":"2025-07-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144680435","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-12DOI: 10.1016/j.jimonfin.2025.103372
Joop Huij , Dries Laurs , Jan Anton van Zanten
We examine the investment implications of three common approaches to sustainable investing. Specifically, we analyze whether implementing sustainability restrictions using SDG scores, ESG ratings, and carbon emissions data affects diversification, factor premiums, and factor exposures of investment portfolios. Our findings indicate that sustainable investing offers similar diversification as unrestricted investment portfolios, and does not affect factor premiums and exposures in the long run per se. While applying sustainability exclusions using SDG scores and carbon emissions data can be effective in avoiding investments in stocks on exclusion lists and sin stocks, applying exclusions using ESG data is not. Our findings have practical relevance in the context of the current debate on the investment implications of sustainable investing.
{"title":"The investment implications of sustainable investing","authors":"Joop Huij , Dries Laurs , Jan Anton van Zanten","doi":"10.1016/j.jimonfin.2025.103372","DOIUrl":"10.1016/j.jimonfin.2025.103372","url":null,"abstract":"<div><div>We examine the investment implications of three common approaches to sustainable investing. Specifically, we analyze whether implementing sustainability restrictions using SDG scores, ESG ratings, and carbon emissions data affects diversification, factor premiums, and factor exposures of investment portfolios. Our findings indicate that sustainable investing offers similar diversification as unrestricted investment portfolios, and does not affect factor premiums and exposures in the long run <em>per se</em>. While applying sustainability exclusions using SDG scores and carbon emissions data can be effective in avoiding investments in stocks on exclusion lists and sin stocks, applying exclusions using ESG data is not. Our findings have practical relevance in the context of the current debate on the investment implications of sustainable investing.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"159 ","pages":"Article 103372"},"PeriodicalIF":3.3,"publicationDate":"2025-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145267340","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-11DOI: 10.1016/j.jimonfin.2025.103393
Christine Strong , Lewis-Landry Gakpa
This study creates a novel dataset to explore the impact of past exposures to currency crises on the exchange rate pass-through (ERPT) to inflation for 26 African countries between 1989 and 2020. We posit that central bankers who have encountered currency crises during their formative years tend to develop more hawkish monetary preferences and exhibit greater risk aversion, thereby bolstering the credibility of monetary policy. Consequently, we hypothesize that past exposures to currency crises should be associated with smaller exchange rate pass-through elasticities. Our empirical analysis lends credence to this hypothesis; we find that as the number of exposures increases, there is a negative relationship between inflation and exchange rate pass-through for African central bankers who have experienced currency crises within the first 25 years of their lives. Furthermore, our findings remain robust even after controlling for measures of central bankers’ expertise, underscoring the enduring influence of early-life experiences on the ERPT-inflation nexus. Additionally, we find that, in an African context, past experiences exert a statistically significant impact on the exchange rate pass-through to inflation nexus compared to alternative measures of credibility, such as legal central bank independence, which do not have any effect.
{"title":"Early-Life currency crises and exchange rate pass-through: Understanding the impact of central Bankers’ formative years in Africa","authors":"Christine Strong , Lewis-Landry Gakpa","doi":"10.1016/j.jimonfin.2025.103393","DOIUrl":"10.1016/j.jimonfin.2025.103393","url":null,"abstract":"<div><div>This study creates a novel dataset to explore the impact of past exposures to currency crises on the exchange rate pass-through (ERPT) to inflation for 26 African countries between 1989 and 2020. We posit that central bankers who have encountered currency crises during their formative years tend to develop more hawkish monetary preferences and exhibit greater risk aversion, thereby bolstering the credibility of monetary policy. Consequently, we hypothesize that past exposures to currency crises should be associated with smaller exchange rate pass-through elasticities. Our empirical analysis lends credence to this hypothesis; we find that as the number of exposures increases, there is a negative relationship between inflation and exchange rate pass-through for African central bankers who have experienced currency crises within the first 25 years of their lives. Furthermore, our findings remain robust even after controlling for measures of central bankers’ expertise, underscoring the enduring influence of early-life experiences on the ERPT-inflation nexus. Additionally, we find that, in an African context, past experiences exert a statistically significant impact on the exchange rate pass-through to inflation nexus compared to alternative measures of credibility, such as legal central bank independence, which do not have any effect.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"157 ","pages":"Article 103393"},"PeriodicalIF":2.8,"publicationDate":"2025-07-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144653868","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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