In a number of countries a substantial proportion of loans is denominated in foreign currency. In this paper we demonstrate how their presence affects the economy. To this end we construct a small open economy model with financial frictions where loans can be taken in domestic or foreign...

We study the implications of multi-period loans for monetary and macroprudential policy, considering several realistic modifications -- variable vs. fixed loan rates, non-negativity constraint on newly granted loans, and occasionally binding collateral constraint -- to an otherwise standard DSGE...