NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Debt Deleveraging and The Exchange Rate

Pierpaolo Benigno, Federica Romei

NBER Working Paper No. 17944
Issued in March 2012
NBER Program(s):   EFG   IFM   ME

Deleveraging from high debt can provoke deep recession with significant international side effects. The exchange rate of the deleveraging country will depreciate in the short run and appreciate in the long run. The real interest rate will fall by more than in the rest of the world. Bounds and policies that constrain the adjustment can prolong and deepen the recession. Early exit strategies from accommodating monetary policy can be quite harmful, as can such other policies as keeping interest rates too high during the deleveraging period. The analysis also applies to a monetary union facing internal adjustment of current account imbalances.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

This paper was revised on November 14, 2012

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17944

Published: “Debt Deleveraging and The Exchange Rate,” Journal of International Economics, 93, 1-16, (2014). (with F. Romei)

Users who downloaded this paper also downloaded these:
Benigno, Benigno, and Nisticò w17133 Risk, Monetary Policy and the Exchange Rate
Crucini and Telmer w17978 Microeconomic Sources of Real Exchange Rate Variability
Reinhart, Reinhart, and Rogoff w18015 Debt Overhangs: Past and Present
Kiyotaki and Moore w17934 Liquidity, Business Cycles, and Monetary Policy
Benigno w14824 New-Keynesian Economics: An AS-AD View
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us