Is Foreign Debt Portfolio Management Efficient in Emerging Economies?

August 1, 2001

Preview Citation

Format: Chicago

Khaled Hussein. Is Foreign Debt Portfolio Management Efficient in Emerging Economies?, (USA: International Monetary Fund, 2001) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper develops a simple model of foreign debt portfolio management. The model suggests that, under mild conditions, the currency composition of a country's foreign debt portfolio is responsive to exchange rate movements. Empirical evidence is provided for a panel of 14 emerging economies in the period 1970-98. Attention is focused on the stocks of foreign liabilities denominated in U.S. dollars, deutsche marks (DM), Japanese yen, and Swiss francs. The results of the empirical analysis show that foreign debt portfolio management has been sub-optimal in the countries under examination. In these countries, the currency composition of foreign debt has not reflected a substitution effect away from the currencies that have appreciated over time vis-à-vis the U.S. dollar.

Subject: Asset and liability management, Currencies, Debt management, Exchange rates, External debt, Foreign exchange, Government debt management, Money, Public financial management (PFM)

Keywords: Asia and Pacific, Central America, Central and Eastern Europe, Currencies, Debt management, Debt share, Deutsche mark, Emerging economies, Exchange rate movement, Exchange rates, Foreign debt, Global, Government debt management, Portfolio management, Portfolio manager, U.S. dollar, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/121
Stock No:

WPIEA1212001
ISBN:

9781451854381
ISSN:

1018-5941

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