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Exchange rate reaction to international organization loans and geopolitical preferences

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  • Oriola, Hugo
  • Saadaoui, Jamel

Abstract

This research provides novel empirical evidence about the exchange rate reaction to international organization loans and geopolitical preferences using an unbalanced panel of 153 countries observed from February 1993 to December 2019. For elected temporary members of the UN Security Council, the International Monetary Fund (IMF) loans cause a sizeable appreciation in the exchange rate vis-à-vis the USD of around 2 percent at the 12-month horizon, after controlling for institutional quality. Asian Development Bank (ADB) loans cause an appreciation of around 0.25 percent at the 4-month horizon. These effects are stronger when the geopolitical distance with China is higher, indicating a higher credibility for these loans.

Suggested Citation

  • Oriola, Hugo & Saadaoui, Jamel, 2025. "Exchange rate reaction to international organization loans and geopolitical preferences," Economics Letters, Elsevier, vol. 248(C).
    • Handle: RePEc:eee:ecolet:v:248:y:2025:i:c:s0165176525000497
    DOI: 10.1016/j.econlet.2025.112212
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    More about this item

    Keywords

    Exchange rates; Geopolitical preferences; International organization loans; Institutional quality; Local projections;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • F30 - International Economics - - International Finance - - - General
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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