Internationalization of emerging market currencies and original sin evidence

Delphine Lahet and Stephanie Prat
Additional contact information
Delphine Lahet: Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - UB - Université de Bordeaux
Stephanie Prat: Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - UB - Université de Bordeaux

Post-Print from HAL

Abstract: This article investigates the impact of the internationalisation of emerging market currencies on original sin, which is the inability of emerging countries to borrow abroad in local currency. The objective is to assess the role of measures of internationalisation on the currency structure of debt for a set of emerging market countries. We show the favourable impact of the internationalisation process on original sin for the period 2005–2018 using two different measures with a dynamic panel data empirical analysis. The main determinants are the foreign exchange (FX) turnover of the currencies, the economic size of the issuing country, and the Volatility Index (VIX). In this way, we highlight network effects between the functions of a currency. The tests also highlight the existence of inertia in the use of a currency for financial transactions. Finally, the results provide evidence on the role of derivative instruments in supporting the use of emerging market currencies in bond markets

Keywords: original sin; inertia; currency internationalisation; debt; network effects; derivative instruments (search for similar items in EconPapers)
Date: 2021-01-08
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Published in The World Economy, 2021, 44 (7), pp.1973- 2003. ⟨10.1111/twec.13091⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03703445

DOI: 10.1111/twec.13091

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().