Public debt and the dollar

Aaron Mehrotra

Public Sector Economics, 2026, vol. 50, issue 1, 67-94

Abstract: We examine the relationship between the broad dollar exchange rate and public debt, using a global panel of over 140 countries. We show that a broad dollar appreciation is associated with higher public debt in the medium run. This pattern is mostly driven by emerging market and developing economies. We further show that it occurs especially in countries that have higher shares of FX debt and for which the market perceptions of debt sustainability are more adverse.

Keywords: public debt; fiscal policy; broad dollar exchange rate (search for similar items in EconPapers)
JEL-codes: F31 F34 H63 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ipf:psejou:v:50:y:2026:i:1:p:67-94

DOI: 10.3326/pse.50.1.4

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