Optimal Currency Composition of Foreign Debt The Case of Five Developing Countries

Many developing countries lack access to future and option markets to hedge the enormous risks arising from the currency exposure of their foreign debt. And even if these markets are accessible, their maturities are often too short compared to the maturities of long-term debt. The important hedging...

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Detalles Bibliográficos
Autor principal: Gawronski, Pier Giorgio (-)
Formato: Capítulo de libro electrónico
Idioma:Inglés
Publicado: Paris : OECD Publishing 1990.
Colección:OECD Development Centre Working Papers, no.23.
Materias:
Ver en Biblioteca Universitat Ramon Llull:https://discovery.url.edu/permalink/34CSUC_URL/1im36ta/alma991009705455606719
Descripción
Sumario:Many developing countries lack access to future and option markets to hedge the enormous risks arising from the currency exposure of their foreign debt. And even if these markets are accessible, their maturities are often too short compared to the maturities of long-term debt. The important hedging instrument available for any country, however, is the currency mix of foreign debt itself. This paper provides a theory for the optimal currency composition of foreign debt for market constrained developing countries. It also develops the empirical methodology to determine the optimal currency mix which is then applied. Applying the method to Brazil, Indonesia, Mexico, the Philippines and South Korea, the optimal mix is compared to alternative currency compositions, both in terms of foreign exchange gains and losses as well as variability of balance of payments flows ...
Descripción Física:1 online resource (67 p. )