Advanced Search
MyIDEAS: Login to save this paper or follow this series

The optimal currency composition of external debt

Contents:

Author Info

  • Claessens, Stijn

Abstract

The increased volatility of exchange rates, interest rates and goods prices has focused fresh attention on the importance for developing countries of reducing their risks in these markets. Although, these countries generally cannotuse such conventional hedging instruments as currency and commodity futures, they can use the currency composition of their external debt to hedge against exchange rates and commodity prices. In this line, this paper uses findings from the literature on optimal portfolio theory to discuss the optimal currency composition of external debt. The analysis considers a small open economy facing a perfect world capital market and a large number of perfect commodity markets. The paper derives the optimal currency composition of the country's aggregate assets and external liabilities and describes the necessary estimations and computations, including how to take into account the currency composition of existing external liabilities.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/1988/06/01/000009265_3960927013006/Rendered/PDF/multi0page.pdf
Download Restriction: no

Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 14.

as in new window
Length:
Date of creation: 30 Jun 1988
Date of revision:
Handle: RePEc:wbk:wbrwps:14

Contact details of provider:
Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Email:
Web page: http://www.worldbank.org/
More information through EDIRC

Related research

Keywords: Economic Theory&Research; Environmental Economics&Policies; Fiscal&Monetary Policy; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Financial Intermediation;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Breeden, Douglas T., 1979. "An intertemporal asset pricing model with stochastic consumption and investment opportunities," Journal of Financial Economics, Elsevier, vol. 7(3), pages 265-296, September.
  2. Merton, Robert C., 1971. "Optimum consumption and portfolio rules in a continuous-time model," Journal of Economic Theory, Elsevier, vol. 3(4), pages 373-413, December.
  3. Dornbusch, Rudiger, 1987. "Exchange Rates and Prices," American Economic Review, American Economic Association, vol. 77(1), pages 93-106, March.
  4. Fischer, Stanley, 1975. "The Demand for Index Bonds," Journal of Political Economy, University of Chicago Press, vol. 83(3), pages 509-34, June.
  5. Adler, Michael & Dumas, Bernard, 1980. "The Exposure of Long-Term Foreign Currency Bonds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(04), pages 973-994, November.
  6. Jorion, Philippe, 1985. "International Portfolio Diversification with Estimation Risk," The Journal of Business, University of Chicago Press, vol. 58(3), pages 259-78, July.
  7. Gemmill, Gordon, 1985. "Optimal hedging on futures markets for commodity-exporting nations," European Economic Review, Elsevier, vol. 27(2), pages 243-261, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. 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.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:14. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.