Original sin and the great depression

Michael D. Bordo and Christopher Meissner

Journal of International Economics, 2023, vol. 145, issue C

Abstract: Do exchange rate movements matter for how markets price foreign currency denominated sovereign bonds? High-frequency bond price data from 1931 show that depreciation against the dollar/gold was associated with elevated risk premia on US dollar/gold public debt. We use a theoretical model to illustrate how foreign currency debt influences exchange rate policy and foreign currency bond prices. We use these theoretical results, the timing of sterling's devaluation in September 1931, and historically determined fundamentals to identify the impact of exchange rate policy on hard-currency bond yields in the Great Depression.

Keywords: Foreign currency debt; Exchange rate policy; Gold standard; Great depression (search for similar items in EconPapers)
Date: 2023
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Working Paper: Original Sin and the Great Depression (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:145:y:2023:i:c:s0022199623001009

DOI: 10.1016/j.jinteco.2023.103814

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