NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Jungjae Park

National University of Singapore
Department of Economics
AS2 Level 6, 1 Arts Link
Singapore

E-Mail: ecspj@nus.edu.sg
Institutional Affiliation: University of Singapore

NBER Working Papers and Publications

May 2018Debauchery and Original Sin: The Currency Composition of Sovereign Debt
with Charles Engel: w24671
This study quantitatively investigates the currency composition of sovereign debt in the presence of two types of limited enforcement frictions arising from a government’s monetary and debt policy: strategic currency debasement and default on sovereign debt. Local currency debt obligations are state contingent because the real value can be changed by a government’s monetary policy, and are therefore a better consumption hedge against income shocks than foreign currency debt. However, this higher degree of state contingency for local currency debt provides policymakers with more temptation to deviate from disciplined monetary policy, thus restricting borrowing in local currency more than in foreign currency. The two financial frictions combine to generate an endogenous debt frontier for loc...
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

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

Contact Us