Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7243225 | Journal of Economic Behavior & Organization | 2015 | 16 Pages |
Abstract
Foreign currency loans by unhedged borrowers are widespread in many regions of the world. Against this background, we study whether the demand for foreign currency loans is driven by a lack of knowledge about the exchange rate risk emanating from such loans. We employ individual-level survey data from eight Central and Eastern European countries that provides information on agents' knowledge about exchange rate risk. Results show, first, that a majority of respondents is aware that depreciations increase loan installments. Second, we find that knowledge about the exchange rate risk exerts a strong impact on the choice of the loan currency.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Elisabeth Beckmann, Helmut Stix,