Do Foreign Currency Accounts Help Relax Credit Constraints? Evidence from Nepal

26 Pages Posted: 6 Aug 2018

See all articles by Nephil Matangi Maskay

Nephil Matangi Maskay

Nepal Rastra Bank

Sven Steinkamp

Universität Osnabrück - Institute of Empirical Economic Research

Frank Westermann

University of Osnabrueck - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Date Written: August 2018

Abstract

We analyse a novel bank‐level data set from Nepal, where domestic and foreign currency (FX) deposits are reported separately on the liability side of commercial bank balance sheets. In a panel regression analysis, we estimate semi‐accounting‐identities that allow us to identify the marginal sources of financing for various asset positions. We find that banks hedge against FX exposure via their sectoral lending composition: banks with a large share of FX deposits primarily lend to firms in traded‐goods sectors. Loans to non‐traded sectors are mostly financed by domestic deposits. While earlier studies have documented a positive impact of FX accounts on financial development, our analysis suggests that this does not need to imply that severely credit constrained sectors are the main beneficiaries of this process.

Suggested Citation

Maskay, Nephil Matangi and Steinkamp, Sven and Westermann, Frank, Do Foreign Currency Accounts Help Relax Credit Constraints? Evidence from Nepal (August 2018). Pacific Economic Review, Vol. 23, Issue 3, pp. 464-489, 2018. Available at SSRN: https://ssrn.com/abstract=3226040 or http://dx.doi.org/10.1111/1468-0106.12183

Nephil Matangi Maskay (Contact Author)

Nepal Rastra Bank ( email )

Nepal

Sven Steinkamp

Universität Osnabrück - Institute of Empirical Economic Research ( email )

Barbarastr. 12
Osnabrueck, 49076
Germany

Frank Westermann

University of Osnabrueck - Department of Economics ( email )

Rolandstr. 8
Osnabrueck, D-49069
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
1
Abstract Views
65
PlumX Metrics