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Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters

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  • Barry Eichengreen
  • Ricardo Hausmann
  • Ugo Panizza

Abstract

Recent years have seen the development of a large literature on balance sheet factors in emerging-market financial crises. In this paper we discuss three concepts widely used in this literature. Two of them original sin' and debt intolerance' seek to explain the same phenomenon, namely, the volatility of emerging-market economies and the difficulty these countries have in servicing and repaying their debts. The debt-intolerance school traces the problem to institutional weaknesses of emerging-market economies that lead to weak and unreliable policies, while the original-sin school traces the problem instead to the structure of global portfolios and international financial markets. The literature on currency mismatches, in contrast, is concerned with the consequences of these problems and with how they are managed by the macroeconomic and financial authorities. Thus, the hypotheses and problems to which these three terms refer are analytically distinct. The tendency to use them synonymously has been an unnecessary source of confusion.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10036.

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Date of creation: Oct 2003
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Publication status: published as Collier, Paul an Jan Willem Gunning (eds.) Globalization and Poverty. Volume 1. What Has Happened? Volume 2. What Are the Channels of Transmission? Volume 3. Policy Responses. Volume 2. Elgar Reference Collection. Globalization of the World Economy series, vol. 19. Cheltenham, U.K. and Northampton, MA: Elgar, 2008.
Handle: RePEc:nbr:nberwo:10036

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  1. Morris Goldstein & Philip Turner, 2004. "Controlling Currency Mismatches in Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 373.
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  1. La deuda en los tiempos de K
    by Lindahl in Finanzas P├║blicas on 2008-08-18 02:30:00
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