During the second half of the 1990s emerging countries have experienced very large swings in the external cost of capital as well as several financial crises, with a large impact on economic growth. For this reason, academics and practitioners interested in emerging economies are paying increasing attention to the determinants of a country’s risk premium. An important one is the real exchange rate, since it is particularly volatile in emerging regions, as compared to industrial ones. Besides, there is a strand of literature exploring the direct link between real exchange fluctuations and economic performance, which can serve as a basis to analyze the relation between the real exchange rate and the risk premium.

Sixty Years After Bretton Woods