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Emerging Countries' External Debt. How Should One Neutralize Hard-Currency Volatility?

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  • Pierre Laurent
  • Nicolas Meunier
  • Luis Miotti
  • Carlos Quenan
  • Véronique Seltz

Abstract

Instability ? and, in particular, the volatility of hard-currency exchange rates ? is a strong characteristic of the financial global environment. Volatility has implications on the emerging economies? competitiveness and external-debt burden. This paper develops a simple model centered on debt dynamics. We show that an emerging economy can stabilize the domestic value of its external debt using three parameters: the currency composition of its debt, its exchange-rate regime, and the geographic structure of its trade.

Suggested Citation

  • Pierre Laurent & Nicolas Meunier & Luis Miotti & Carlos Quenan & Véronique Seltz, 2003. "Emerging Countries' External Debt. How Should One Neutralize Hard-Currency Volatility?," Revue économique, Presses de Sciences-Po, vol. 54(5), pages 1033-1055.
    • Handle: RePEc:cai:recosp:reco_545_1033
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