Why is Dollar Debt Cheaper? Evidence from Peru

The Global Domain of the Dollar: Eight Questions

Atlantic Economic Journal ◽

10.1007/s11293-020-09692-0 ◽

2020 ◽

Vol 48 (4) ◽

pp. 421-429

Author(s):

Robert N. McCauley

Keyword(s):

Economic Activity ◽

Balance Sheet ◽

The United States ◽

Fiscal Deficits ◽

Exorbitant Privilege ◽

The World ◽

World Economic ◽

Dollar Debt ◽

The 1960S ◽

The U.S

Abstract Since the late 1950s, the rest of the world has come to use the dollar to an extent that justifies speaking of the dollar’s global domain. The rest of the world denominates much debt in U.S. dollars, extending U.S. monetary policy’s sway. In addition, in outstanding foreign exchange deals, the rest of the world has undertaken to pay still more in U.S. dollars: off-balance-sheet dollar debts buried in footnotes. Consistent with the scale of dollar debt, most of the world economic activity takes place in countries with currencies tied to or relatively stable against the dollar, forming a dollar zone much larger than the euro zone. Even though the dollar assets of the world (minus the United States) exceed dollar liabilities, corporate sector dollar debts seem to make dollar appreciation akin to a global tightening of credit. Since the 1960s, claims that the dollar’s global role suffers from instability and confers great benefits on the U.S. economy have attracted much support. However, evidence that demand for dollars from official reserve managers forces unsustainable U.S. current account or fiscal deficits is not strong. The so-called exorbitant privilege is small or shared. In 2008 and again in 2020, the Federal Reserve demonstrated a willingness and capacity to backstop the global domain of the dollar. Politics could constrain the Fed’s ability to backstop the growing share of the domain of the dollar accounted for by countries that are not on such friendly terms with the U.S.

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Excessive Dollar Debt: Financial Development and Underinsurance

SSRN Electronic Journal ◽

10.2139/ssrn.306360 ◽

2002 ◽

Cited By ~ 3

Author(s):

Ricardo J. Caballero ◽

Arvind Krishnamurthy

Keyword(s):

Financial Development ◽

Dollar Debt

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Mitigating Systemic Spillovers from Currency Hedging

National Institute Economic Review ◽

10.1177/002795011222100115 ◽

2012 ◽

Vol 221 ◽

pp. R44-R56 ◽

Cited By ~ 8

Author(s):

Kyuil Chung ◽

Hail Park ◽

Hyun Song Shin

Keyword(s):

Currency Crises ◽

Banking Sector ◽

Foreign Currency ◽

Financial Institution ◽

Financial System ◽

Public Institution ◽

Main Role ◽

Short Term ◽

Currency Hedging ◽

Dollar Debt

Korea has been a forerunner in incorporating macroprudential policies to mitigate the vulnerabilities from currency crises that can turn into a more generalised liquidity crisis. This paper examines longer-term design issues for a more resilient and stable financial system that could be expected to complement the existing macroprudential measures in achieving a more stable financial system. In particular, the paper examines the rationale and mechanics of a new public financial institution, provisionally called the Exchange Stabilisation and Guarantee Corporation (ESGC) whose main role is to buy dollar forward positions from Korean exporting companies who wish to hedge the currency exposure from long-term export orders. The ESGC is intended to mitigate the risks arising from the reliance on the role of the banking sector in providing currency hedging services to exporters. Rapid growth of short-term foreign currency denominated debt has been the result of banks receiving forward dollar sales by exporters, and then hedging the long dollar position by borrowing short in dollars. A public institution that can buy dollars forward, but which is designed so that there is no need to hedge by taking short dollar debt, can mitigate the rapid increase in short-term dollar debt in booms.

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Excessive Dollar Debt: Financial Development and Underinsurance

The Journal of Finance ◽

10.1111/1540-6261.00549 ◽

2003 ◽

Vol 58 (2) ◽

pp. 867-893 ◽

Cited By ~ 152

Author(s):

Ricardo J. Caballero ◽

Arvind Krishnamurthy

Keyword(s):

Financial Development ◽

Dollar Debt

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Chad elections will be too late to challenge president

Emerald Expert Briefings ◽

10.1108/oxan-db232050 ◽

2018 ◽

Keyword(s):

Prime Minister ◽

Central Feature ◽

Legislative Elections ◽

Institutional Reforms ◽

Content Type ◽

Self Confidence ◽

Breathing Space ◽

Economic Support ◽

Dollar Debt ◽

National Forum

Subject Prospects for authoritarianism in Chad. Significance President Idriss Deby Itno announced on April 7 that legislative elections would take place in November 2018, after a delay of three years. The move comes shortly after the end on March 28 of the Inclusive National Forum on Institutional Reforms, which culminated in an announcement that Chad would adopt a new constitution with a presidential system of government instead of the current semi-presidential one. Reinforced presidential authority -- with the post of prime minster abolished -- will be the central feature. Impacts February's restructuring of its 1.36-billion-dollar debt to Glencore will provide Chad with two years' breathing space. The surprise decision to abolish the post of prime minister reinforces the concentration of authority in the president's hands. The overhaul of the constitution shows Deby's self-confidence after securing crucial economic support from the international community.

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Mozambique’s FRELIMO will ignore external pressures

Emerald Expert Briefings ◽

10.1108/oxan-db230030 ◽

2018 ◽

Keyword(s):

Attorney General ◽

Third Party ◽

Local Elections ◽

Security Threats ◽

Content Type ◽

Fiscal Transparency ◽

Demographic Projections ◽

External Pressures ◽

Dollar Debt ◽

Opposition Movement

Subject Mozambican fiscal and security threats Significance President Filipe Nyusi on February 8 announced a deal with Afonso Dhlakama, leader of opposition movement RENAMO, on provincial decentralisation. This came a week after the attorney-general confirmed that a legal complaint had been passed to the audit court for potential prosecutions relating to a long-running 2-billion-dollar debt scandal. While the ruling FRELIMO has trumpeted these developments as evidence of a commitment to peace and fiscal transparency, elite politicking risks undermining both, while increasing insecurity is threatening several pending gas deals. Impacts Given Mozambique's demographic projections, present economic growth trends are unlikely to substantially reduce widespread poverty. Controversy will persist over the management of local elections in Nampula amid allegations of fraud and malpractice. The FRELIMO-RENAMO provincial deal could undermine democracy by making it harder for third-party or independent candidates to become mayors.

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