Currency boards, dollarized liabilities, and monetary policy credibility

Spiegel, Mark M.; Valderrama, Diego

doi:10.1016/j.jimonfin.2003.09.010

Cited by 5 publications

(6 citation statements)

References 30 publications

(17 reference statements)

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“…With interest rates on foreign currency loans below those for domestic currency loans, and the peg interpreted as an implicit exchange rate guarantee, borrowers readily took on foreign currency debt and domestic banks offered dollarized or euro-ized accounts on a large scale to local clients (Impavido, Rudolph, and Ruggerone 2013;Magud, Reinhart, and Rogoff 2011;Spiegel and Valderrama 2003). Reliance on dollardenominated debt often ended with rising debt-to-GDP ratios when EMDE currencies eventually depreciated against the U.S. dollar.…”

Section: A Us Policy Interest Rates B Capital Flows To Emdesmentioning

confidence: 99%

Global Waves of Debt: Causes and Consequences

Köse¹,

Nagle²,

Ohnsorge³

et al. 2021

105

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Some rights reserved 1234 24232221This work is a product of the staff of The Wotld Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility fot any errors, omissions, or discrepancies in the infotmation, or liability with tespect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.Nothing herein shall constitute ot be construed or considered to be a limitation upon ot waiver of the privileges and immunities of The World Bank, all of which are specifically reserved.

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Section: A Us Policy Interest Rates B Capital Flows To Emdesmentioning

confidence: 99%

Global Waves of Debt: Causes and Consequences

Köse¹,

Nagle²,

Ohnsorge³

et al. 2021

105

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“…But the economy was highly dollarized, with 80 percent of private debt denominated in dollars, considerably higher than in LAC peers: for example, in Chile, only 38 percent of debt was dollar-denominated (Calvo and Talvi 2005). Thus, any currency depreciation would increase the value of liabilities relative to assets and incomes in the economy and would be very costly (Spiegel and Valderrama 2003). Meanwhile, international reserves were very low relative to total debt.…”

Section: Vulnerabilities In Argentinamentioning

confidence: 99%

Asia’s Public Debt: Will a Stabilization Period Come?

Nozdrev

2022

WEIR

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The article discusses the main trends characterizing the development of the situation with internal and external public debt in Asia in the modern period. The leading factor in the growth of domestic debt was the spread of the COVID 19 pandemic, which made the Asian states face the need to sharply increase financial support for the socio-economic sphere for an indefinite period, which leads to a revision of the upper limit of the budget deficit and a narrowing of the country’s fiscal space. There is an increasing danger of an excess of budget expenditures over income caused by the expansion of loans and guarantees to small and medium-sized businesses and support for households due to the growing wave of bankruptcies and financial insolvency. The pressure is most felt on low-income Asian countries with underdeveloped capital markets that are at high risk of a debt crisis. The article notes that after a period of external financial stability, the problem of repayment of external debt caused by the deficit of their balance of payments is again aggravated in the developing countries of Asia. Crisis phenomena in the economy impose restrictions on the volume of resources coming from outside. At the same time, the needs of developing Asian countries for an influx of international funds in connection with the repayment of previously attracted loans and debt restructuring are increasing significantly. A forecast is made that, in general, in 2022–2023, the external public debt of Asian countries will continue to increase, exacerbating the vulnerability of their economies. Some of them will have to change their development model due to increased risks – increased funding needs, foreign investor positions, exchange rate fluctuations and short maturities of liabilities requiring a reprioritization of government spending and a more efficient budget process. It is concluded that while looking for a solution to the problems of attracting new borrowings and at the same time increased debt servicing, in some cases Asian countries will inevitably face a peak in debt, the need for debt restructuring and new difficult negotiations with creditor countries.

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“…In contrast, Sibert (1992) argues that independent fiscal policies by member countries may produce too little inflation. The effects of shocks and country size on the inflationary bias are discussed in Boschen and Weise (2004), Spiegel and Valderrama (2003), and Martin (1994). 8 The intuition is that conservatism makes (expansionary) monetary policy painful.…”

Section: Introductionmentioning

confidence: 99%

Grand corruption instead of commitment? Reconsidering time-inconsistency of monetary policy

Bohn

2013

Journal of International Money and Finance

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Currency boards, dollarized liabilities, and monetary policy credibility

Cited by 5 publications

References 30 publications

Global Waves of Debt: Causes and Consequences

Global Waves of Debt: Causes and Consequences

Asia’s Public Debt: Will a Stabilization Period Come?

Grand corruption instead of commitment? Reconsidering time-inconsistency of monetary policy

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