Original Sin Mystery Trinity and Unequal Blessings

Deniz Arinsoy () and Erdal Ozmen ()
Additional contact information
Deniz Arinsoy: Undersecretariat of the Turkish Treasury

No 415, ERC Working Papers from ERC - Economic Research Center, Middle East Technical University

Abstract: We investigate whether the fact that most countries cannot borrow internationally in their own currencies, referred to as “original sin” by Eichengreen and Hausmann (1999), may remain as a “mystery” when an alternative variable set and estimation procedure are taken into account. Our results suggest that flexible exchange rates and strong macroeconomic policy stance with sound institutions are necessary but not sufficient for redemption from original sin. Original sin appears to be persistent and determined also by the variables which are beyond the sole control of individual countries. Consequently, redemption from it and satisfying the blessed trinity of international currency, flexible exchange rates and sound institutions requires a new international financial system allowing complete markets for all currencies meeting the necessary conditions.

Keywords: Currency mismatches; Exchange rate regimes; International financial architecture; Original sin; Rule of law (search for similar items in EconPapers)
JEL-codes: F33 F34 F41 G15 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2004-10, Revised 2004-10
New Economics Papers: this item is included in nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://erc.metu.edu.tr/en/system/files/menu/series04/0415.pdf First version, 2004 (application/pdf)

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:met:wpaper:0415

Access Statistics for this paper

More papers in ERC Working Papers from ERC - Economic Research Center, Middle East Technical University Contact information at EDIRC.
Bibliographic data for series maintained by Erol Taymaz ().