Identifying the effects of an exchange rate depreciation on country risk: Evidence from a natural experiment
Michael Bordo (),
Christopher Meissner () and
Marc D. Weidenmier
Journal of International Money and Finance, 2009, vol. 28, issue 6, 1022-1044
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.
Keywords: Foreign; currency; debt; Bimetallism; Gold; standard; Sovereign; risk (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:28:y:2009:i:6:p:1022-1044
Access Statistics for this article
Journal of International Money and Finance is currently edited by J. R. Lothian
More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().