Foreign currency debt has many advantages for the borrower. It provides access to financial capital to fund investment increases financial globalization and
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Moreover if there are benefits to be exploited from swap-covered borrowing
firms which are the best performers
capital markets are more likely to borrow in foreign currencies than This paper examines the role of foreign currency debt by taking advantage of a.
Section V shows how monetary policy can provide insurance to domestic borrowers who take advantage of it by borrowing in domestic currency. Section VI studies.
In financial markets comparative advantage exists when the same risk is priced differently in different markets. If borrowing costs differ across markets
Comparative advantage is a more convincing motivation for swap-covered foreign currency borrowing. Indeed central banks in countries with large volumes of
Unhedged foreign currency borrowing is risky because it makes the borrower sensi- tive to exchange rate fluctuations. If a government borrows in the markets in
3/11/2021 The repayment of foreign currency loans by the Riksbank (the Swedish central bank) also has a negative effect on the borrowing requirement. A.