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The Mystery of Original Sin

The Mystery of Original Sin

(p.233) 9 The Mystery of Original Sin
Other People's Money
Barry Eichengreen, Ricardo Hausmann, Ugo Panizza
University of Chicago Press

This chapter analyzes the mystery of original sin using several indicators. It presents evidence of the explanatory power of a series of alternative explanations. The surprising finding is that the conventional hypotheses have remarkably little explanatory power for the phenomenon at hand. In other words, the standard policy and institutional variables shed remarkably little light on why so many emerging markets find it so difficult to borrow abroad in their own currencies, and they offer little in the way of an explanation for why a small number of emerging markets have been able to escape this plight. These results prompted the author to explore the possibility that the problem of original sin has at least as much to do with the structure and operation of the international financial system as with the weakness of policies and institutions.

Keywords:   original sin, standard policy, institutional variables, emerging markets, international financial system

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