Financial Crises, 1880–1913
Financial Crises, 1880–1913
The Role of Foreign Currency Debt
The emerging country experience was in contrast to that of the advanced core countries, which were financially mature, had credibility, could issue bonds denominated in terms of their own currency, and where there were few crises. This chapter examines whether these very different debt structures might play a role in explaining the difference in crisis incidence, and also explores whether debt-management policies that created or alleviated balance sheet mismatches mattered. It looks at whether poor reputation and accumulated default experience was a problem, as hypothesized by Carmen Reinhart, Kenneth Rogoff, and Miguel Savastano in their work on debt intolerance. The chapter also develops a database to identify and distinguish original sin and balance sheet crises from more traditional currency and banking crises for roughly thirty countries (both advanced and emerging) from 1880 to 1913.
Keywords: bonds, debt structures, crisis incidence, debt-management policies, balance sheet, Carmen Reinhart, Kenneth Rogoff, Miguel Savastano, debt intolerance, original sin
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