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Exchange rate reaction to international organization loans and geopolitical preferences

Author

Listed:
  • Hugo Oriola
  • Jamel Saadaoui

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 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. ADB loans cause an appreciation of around 0.25 percent at the 4-month horizons. These effects are stronger when the geopolitical distance with China is higher, indicating a higher credibility for these loans.

Suggested Citation

  • Hugo Oriola & Jamel Saadaoui, 2025. "Exchange rate reaction to international organization loans and geopolitical preferences," EconomiX Working Papers 2025-2, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2025-2
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    File URL: https://economix.fr/pdf/dt/2025/WP_EcoX_2025-2.pdf
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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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