Foreign currency debt, financial crises and economic growth: A long-run view

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• 作者：Michael D. Bordo ; Christopher M. Meissner ; David Stuckler
• 关键词：Foreign currency debt ; Currency crises ; Sudden stops ; Financial development
• 刊名：Journal of International Money and Finance
• 出版年：2010
• 出版时间：June 2010
• 年：2010
• 卷：29
• 期：4
• 页码：642-665
• 全文大小：359 K

文摘

Foreign currency debt is widely believed to increase risks of financial crisis, especially after being implicated as a cause of the East Asian crisis in the late 1990s. In this paper, we study the effects of foreign currency debt on currency and debt crises and its indirect effects on short-term growth and long-run output effects in both 1880–1913 and 1973–2003 for 45 countries. Greater ratios of foreign currency debt to total debt are associated with increased risks of currency and debt crises, although the strength of the association depends crucially on the size of a country's reserve base and its policy credibility. We found that financial crises, driven by exposure to foreign currency, resulted in significant permanent output losses. We estimate some implications of our findings for the risks posed by currently high levels of foreign currency liabilities in eastern Europe.