Exchange rate uncertainty, consumption preferences and the currency denomination of external debt

Author: Miller V.

Source: Applied Financial Economics, Volume 6, Number 3, 1 June 1996 , pp. 199-211(13)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

The relationship between consumption patterns of OECD member countries and the currency denomination of external debt is studied. It is shown that in general, the more important a country's goods in world consumption, the larger the proportion of external debt denominated in that country's currency. External debt currency denomination is also shown to be influenced by relative attitudes towards risk and market power. The paper offers an explanation for why roughly 34% of all bonds issued on international capital markets in 1991 were denominated in US dollars when the US was accountable for only 7.4% of the total new offshore bonds issued.

Language: English

Document Type: Research article

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