Currency Allocation of Public External Debt and Synchronization Indicators of Exchange Rate Volatility
AbstractThis paper uses synchronization indicators of domestic and foreign fundamentals to choose suitable currency allocation of public external debt. The selection of explanatory variables for exchange rate volatility is motivated using a New Keynesian Policy model that predicts that not only traditional optimum currency area (OCA) variables, but also variables considered by the literature on currency preferences, such as money velocity, should be relevant for explaining exchange rate volatility. I find that measures of inflation synchronization, money velocity synchronization and interest rate synchronization are useful indicators for deciding on the currency denomination of public external debt.
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal Comparative Economic Studies.
Volume (Year): 52 (2010)
Issue (Month): 1 (March)
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- Melecky, Ales & Melecky, Martin, 2011. "Analyzing the Impact of Macroeconomic Shocks on Public Debt Dynamics: An Application to the Czech Republic," MPRA Paper 34114, University Library of Munich, Germany.
- Melecky, Martin, 2010.
"Choosing the Currency Structure of Foreign-currency Debt: a Review of Policy Approaches,"
21268, University Library of Munich, Germany.
- Martin Melecky, 2012. "Choosing The Currency Structure Of Foreign‐Currency Debt: A Review Of Policy Approaches," Journal of International Development, John Wiley & Sons, Ltd., vol. 24(2), pages 133-151, 03.
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