Why Do Emerging Economies Borrow in Foreign Currency? [electronic resource] Jeanne, Olivier.
- Washington, D.C. : International Monetary Fund, 2003.
- IMF eLibrary
IMF Working Papers; Working Paper No. 03/177.
IMF Working Papers; Working Paper No. 03/177
- Government document
1 online resource (38 p.)
- Local subjects:
- Balance sheet effects.
Capital and Ownership Structure.
Currency composition of debt.
Financial Aspects of Economic Integration.
Foreign currency debt.
Nominal interest rate.
Real interest rate.
Real interest rates.
Terms of debts.
Hong Kong Special Administrative Region of China.
- This paper explores the hypothesis that the dollarization of liabilities in emerging market economies is the result of a lack of monetary credibility. I present a model in which firms choose the currency composition of their debts so as to minimize their probability of default. Decreasing monetary credibility can induce firms to dollarize their liabilities, even though this makes them vulnerable to a depreciation of the domestic currency. The channel is different from the channel studied in the earlier literature on sovereign debt, and it applies to both private and public debt. The paper presents some empirical evidence and discusses policy implications.
- Description based on print version record.
- Jeanne, Olivier.
- Other format:
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- Restricted for use by site license.
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