Foreign Exchange Pressures in Latin America: Does Debt Matter?

Graham Bird and Alex (Alexandros) Mandilaras

No 1307, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: Latin American countries have been in the eye of economic and ¯nancial storms several times in recent years. Advice from the International Monetary Fund has consistently highlighted the need for sound fiscal policies and lower debt levels. But is public debt relevant? Following a brief discussion of the theoretical issues involved, this paper examines empirically the relationship between public indebtedness and pressures in the foreign exchange market. Alternative measures are used to capture the latter and the analysis controls for a de facto classi¯cation of exchange rate regimes. Estimations of static and dynamic panels for 28 Latin American and Caribbean (LAC) countries report substantial fiscal effects.

Keywords: currency crises; public debt; latin america (search for similar items in EconPapers)
JEL-codes: F30 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2007
New Economics Papers: this item is included in nep-cba and nep-ifn
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Forthcoming in Journal of International Development

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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:1307

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