The Original Sin and Exchange Rate Dynamics: Panel Cointegration Evidence

23 Pages Posted: 23 Aug 2013

See all articles by Donneil Cain

Donneil Cain

University of the West Indies (Mona)

Adrian Thaxter

University of the West Indies (Mona)

Darron Anthony Thomas

University of Technology Jamaica

Kadeshah Thomas

University of Technology, Jamaica

Apryl-Ann Walker

University of the West Indies (Mona)

Date Written: December 1, 2012

Abstract

Developing country governments are often forced to issue debt in a foreign currency or commit the "original sin". The "original sin", regardless of exchange rate regime, exacerbates debt problems for these countries. Consequently, this paper investigates the relationship between US dollar denominated government debt and exchange rate movements using unbalanced panel data co-integration techniques on 87 low and middle income countries over the period 1960 to 2006. Our findings suggests that exchange rate Granger-causes the stock of foreign currency denominated debt, however, there is no bidirectional causality.

Keywords: Panel Cointegration, Original Sin, Exchange Rate Dynamics

JEL Classification: C23, H60, H63, F31

Suggested Citation

Cain, Donneil and Thaxter, Adrian and Thomas, Darron Anthony and Thomas, Kadeshah and Walker, Apryl-Ann, The Original Sin and Exchange Rate Dynamics: Panel Cointegration Evidence (December 1, 2012). Available at SSRN: https://ssrn.com/abstract=2312425 or http://dx.doi.org/10.2139/ssrn.2312425

Donneil Cain

University of the West Indies (Mona) ( email )

Kingston, Kingston 7

Adrian Thaxter

University of the West Indies (Mona) ( email )

Kingston, Kingston 7

Darron Anthony Thomas (Contact Author)

University of Technology Jamaica ( email )

Papine
Jamaica

Kadeshah Thomas

University of Technology, Jamaica ( email )

237 Old Hope Road
Papine, Kingston and St. Andrew Kingston 6
Jamaica

Apryl-Ann Walker

University of the West Indies (Mona) ( email )

Kingston, Kingston 7

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
71
Abstract Views
523
Rank
589,797
PlumX Metrics