{"title":"Optimal Share of Public Debt in Local Currency","authors":"C. Sarmiento","doi":"10.2139/ssrn.3784343","DOIUrl":null,"url":null,"abstract":"This paper shows analytically the optimal allocation of public debt between local and foreign currency denominated debt. The stark differences in optimal behavior between developed and developing countries are accounted in terms of larger sensitivity of local interest rates to fiscal deficits in the developing world. The presence of excess saving in the developed economies particularly accentuates this observation.","PeriodicalId":13701,"journal":{"name":"International Corporate Finance eJournal","volume":"4 1","pages":""},"PeriodicalIF":0.0000,"publicationDate":"2021-02-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Corporate Finance eJournal","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.3784343","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
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Abstract
This paper shows analytically the optimal allocation of public debt between local and foreign currency denominated debt. The stark differences in optimal behavior between developed and developing countries are accounted in terms of larger sensitivity of local interest rates to fiscal deficits in the developing world. The presence of excess saving in the developed economies particularly accentuates this observation.
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