Encoding of strings in stylesheet parameters

I am using stylesheet parameters to pass values to be displayed in the
final html.

Does Xalan support multi-byte encodings in stylesheet parameters, and if
it does, which encoding does it expect - Does it expect parameter to be
in the encoding of the input XML document, or of the input XSL document?
Or is it based on the host machine?

My Input XSL is ISO-8859-1. Input XML is determined by database encoding
(may be ISO-8859-1 or any other). Output is UTF-8 by default.

Appreciate any info.

Thanks,
Ganesh.