Credit and moral hazard in a dual currency economy

Eduardo Siandra
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Eduardo Siandra: Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República

No 1103, Documentos de Trabajo (working papers) from Department of Economics - dECON

Abstract: This paper discusses moral hazard problems in credit markets where two convertible currencies circulate. Mismatching is viewed as a moral hazard phenomenon where risk neutral borrowers gamble on the depreciation of the loan currency when interest rates are high enough. We study instances in which exchange risk raises the overall credit risk of investment projects.

Pages: 30
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:ude:wpaper:1103

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