While the trade channel indicates that an exchange rate depreciation will stimulate domestic economic activity, the financial channel can have the opposite effect. When banks and non-banks have foreign currency liabilities, an exchange rate depreciation has valuation effects that can lead to a...

The last decade has witnessed a marked improvement in information technology. Such an improvement has reduced the information cost for market participants. Thus, whether the influence of geographic factors on international financial linkage is still significant nowadays is an important question...