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Other People's MoneyDebt Denomination and Financial Instability in Emerging Market Economies$
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Barry Eichengreen and Ricardo Hausmann

Print publication date: 2005

Print ISBN-13: 9780226194554

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226194578.001.0001

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 28 May 2020

Original Sin

Original Sin

The Road to Redemption

(p.266) 10 Original Sin
Other People's Money
Barry Eichengreen, Ricardo Hausmann
University of Chicago Press

This chapter proposes the creation of a synthetic unit of account in which claims on a diversified group of emerging-market economies can be denominated, together with steps by the international financial institutions to develop a liquid market in claims denominated in this unit. As this new unit conquers space in the global portfolio, it will become possible for emerging-market borrowers to issue claims denominated in the underlying currencies and to place them on international markets. The result will be a more efficient international diversification of risks and a reduction in financial fragility. The World Bank has attempted to promote the development of insurance markets for terms-of-trade risk. The chapter's proposal is one more attempt, in this spirit, to help to complete incomplete financial markets.

Keywords:   synthetic unit, emerging-market economies, international financial institutions, liquid market, claims, World Bank, insurance markets, terms-of-trade risk, financial markets

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