Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/29653
Authors: 
Harms, Philipp
Hoffmann, Mathias
Year of Publication: 
2009
Series/Report no.: 
Discussion Paper Series 1: Economic Studies 2009,34
Abstract: 
We argue that a higher share of the private sector in a country's external debt raises the incentive to stabilize the exchange rate. We present a simple model in which exchange rate volatility does not affect agents' welfare if all the debt is incurred by the government. Once we introduce private banks who borrow in foreign currency and lend to domestic firms, the monetary authority has an incentive to dampen the distributional consequences of exchange rate fluctuations. Our empirical results support the hypothesis that not only the level, but also the composition of foreign debt matters for exchange-rate policy.
Subjects: 
Exchange rate regimes
foreign debt
monetary policy
JEL: 
E52
F31
F41
ISBN: 
978-3-86558-588-2
Document Type: 
Working Paper

Files in This Item:
File
Size
321.67 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.