Debt Buildup and Currency Vulnerability: Evidence from Global Markets

Donghyun Park, Arief Ramayandi and Shu Tian ()
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Shu Tian: Asian Development Bank

No 623, ADB Economics Working Paper Series from Asian Development Bank

Abstract: In this study, we examine how public and private debt buildup is related to currency depreciation pressure. Our empirical analysis of a panel dataset of 59 advanced and emerging markets reveals that both private and public debt exacerbate currency vulnerability. However, the evidence of a significant effect on currency depreciation pressure is more robust and consistent for private debt than public debt. Furthermore, we find that excessive private debt buildup can be particularly harmful in emerging markets. In addition, our evidence suggests that greater dependence on external financing exacerbates the impact of debt buildup on currency stress. Overall, the evidence highlights the importance of a comprehensive debt surveillance framework which monitors both public and private debt buildup, especially in emerging markets.

Keywords: currency stress; exchange rate; financial vulnerability; private debt; public debt (search for similar items in EconPapers)
JEL-codes: E44 E50 F31 G15 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2020-10-20
New Economics Papers: this item is included in nep-cba and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Debt Buildup and Currency Vulnerability: Evidence from Global Markets (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0623

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