Identifying the effects of an exchange rate depreciation on country risk: Evidence from a natural experiment
A natural experiment is used to study exchange rate depreciation and perceived sovereign risk. France suspended coinage of silver in 1876 provoking a significant exogenous depreciation of all silver standard countries versus gold standard currencies like the British pound - the currency in which their debt was payable. The evidence suggests an exchange rate depreciation can significantly increase sovereign risk if a country is exposed to foreign currency debt. We implement a difference-in-differences estimator and find that the average silver country's spread on hard currency debt increased over ten percent relative to non-silver countries.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003.
Brookings Papers on Economic Activity,
Economic Studies Program, The Brookings Institution, vol. 34(1), pages 1-74.
- Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," NBER Working Papers 9908, National Bureau of Economic Research, Inc.
- Reinhart, Carmen & Rogoff, Kenneth & Savastano, Miguel, 2003. "Debt intolerance," MPRA Paper 13932, University Library of Munich, Germany.
- Reinhart, Carmen, 2004. "Debt intolerance: Executive summary," MPRA Paper 13398, University Library of Munich, Germany.
- Luis Felipe Céspedes & Roberto Chang & Andrés Velasco, 2004. "Balance Sheets and Exchange Rate Policy," American Economic Review, American Economic Association, vol. 94(4), pages 1183-1193, September.
- Luis Felipe Cespedes & Roberto Chang & Andres Velasco, 2000. "Balance Sheets and Exchange Rate Policy," NBER Working Papers 7840, National Bureau of Economic Research, Inc.
- Oppers, Stefan Erik, 1996. "Was the worldwide shift to gold inevitable? An analysis of the end of bimetallism," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 143-162, February.
- Oppers, S.E., 1994. "Was the Worldwide Shift to Gold Inevitable? An Analysis of the End pf Bimetalism," Working Papers 351, Research Seminar in International Economics, University of Michigan.
- Flandreau, Marc, 1996. "The French Crime of 1873: An Essay on the Emergence of the International Gold Standard, 1870–1880," The Journal of Economic History, Cambridge University Press, vol. 56(04), pages 862-897, December.
- Nugent, Jeffrey B, 1973. "Exchange-Rate Movements and Economic Development in the Late Nineteenth Century," Journal of Political Economy, University of Chicago Press, vol. 81(5), pages 1110-1135, Sept.-Oct.
- Friedman, Milton, 1990. "Bimetallism Revisited," Journal of Economic Perspectives, American Economic Association, vol. 4(4), pages 85-104, Fall.
- Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2003. "Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters," NBER Working Papers 10036, National Bureau of Economic Research, Inc.
- C. F. Remer, 1926. "International Trade between Gold and Silver Countries: China, 1885–1913," The Quarterly Journal of Economics, Oxford University Press, vol. 40(4), pages 597-643.
- Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
- Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
- Michael D. Bordo & Christopher Meissner & Angela Redish, 2003. "How "Original Sin" was Overcome: The Evolution of External Debt Denominated in Domestic Currencies in the United States and the British Dominions," NBER Working Papers 9841, National Bureau of Economic Research, Inc.
- Flandreau, Marc & Sussman, Nathan, 2004. "Old Sins: Exchange Rate Clauses and European Foreign Lending in the 19th Century," CEPR Discussion Papers 4248, C.E.P.R. Discussion Papers.
- Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
- Hanson, John R, II, 1975. "Exchange-Rate Movements and Economic Development in the Late Nineteenth Century: A Critique," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 859-862, August. Full references (including those not matched with items on IDEAS)