TY  - JOUR
AU  - Bordo,Michael D.
AU  - Meissner,Christopher M.
AU  - Stuckler,David
TI  - Foreign Currency Debt, Financial Crises and Economic Growth: A Long Run View
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15534
PY  - 2009
Y2  - November 2009
UR  - http://www.nber.org/papers/w15534
L1  - http://www.nber.org/papers/w15534.pdf
N1  - Author contact info:
Michael D. Bordo
Department of Economics
Rutgers University
New Jersey Hall
75 Hamilton Street
New Brunswick, NJ 08901
Tel: 732/822-7152
Fax: 732/932-7416
E-Mail: bordo@econ.rutgers.edu

Christopher M. Meissner
Department of Economics
University of California, Davis
One Shields Avenue
Davis, CA 95616
Tel: +1 (530) 752-3108
Fax: +1 (530) 752-9382
E-Mail: cmmeissner@ucdavis.edu

David Stuckler
Christ Church
Oxford, OX1 1DP
UK
E-Mail: David.Stuckler@Aya.Yale.Edu
AB  - 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 short and long run effects on output between 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 find that financial crises, driven by exposure to foreign currency, resulted in significant permanent output losses. We evaluate our findings by looking at the risk posed by high levels of foreign currency liabilities in eastern Europe in late 2008.
ER  -