Sovereign risk, debt composition and exchange rate regimes

Keyser, Alice and Paczos, Wojtek ORCID: https://orcid.org/0000-0002-8129-0235 2023. Sovereign risk, debt composition and exchange rate regimes. Finance Research Letters 58 (Part B) , 104396. 10.1016/j.frl.2023.104396

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Abstract

Domestic and foreign debt risks, like exchange rate fluctuations and defaults, are influenced by the exchange rate regime. Analyzing data from 2004 to 2021 for 46 economies, we find that risk increases with higher public debt-to-GDP ratios (size effect), and a larger proportion of foreign debt (composition effect). However, the effects vary based on exchange rate regimes: composition effect is strong in floating, ambiguous in managed, and absent in monetary unions. The size effect is strong in monetary unions, weak in floating, and absent in managed regimes.

Item Type:	Article
Date Type:	Published Online
Status:	Published
Schools:	Business (Including Economics)
Additional Information:	License information from Publisher: LICENSE 1: URL: http://creativecommons.org/licenses/by-nc-nd/4.0/, Start Date: 2023-09-03
Publisher:	Elsevier
ISSN:	1544-6123
Date of First Compliant Deposit:	11 September 2023
Date of Acceptance:	29 August 2023
Last Modified:	12 Sep 2023 07:35
URI:	https://orca.cardiff.ac.uk/id/eprint/162385

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