IMF Policy Discussion Papers Volume 2000 Issue 008: Reconsidering External Financing of Domestic Budget Deficits: Debunking Some Received Wisdom (2000)

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Reconsidering External Financing of Domestic Budget Deficits: Debunking Some Received Wisdom

Author:

Mr. David Woo

Mr. David Woo
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Mr. Simon T Gray

Mr. Simon T Gray
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Series:: IMF Policy Discussion Papers

Volume/Issue:: Volume 2000: Issue 008

Publication Date:: 01 Jul 2000

DOI:: https://doi.org/10.5089/9781451970951.003

ISBN:: 9781451970951

ISSN:: 1564-5193

Pages:: 24

Keywords:: PDP; cost; financing; investor; debt issue; risk appetite; Debt management; foreign currency denominated sovereign debt; currency denomination; currency composition; currency diversification of debt issue; funding cost; currency risk premium; bill issuance; foreign exchange position; currency diversification; rate risk; foreign currency reserve; Currencies; Government debt management; International capital markets; Exchange rate risk

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

Series:: IMF Policy Discussion Papers

Volume/Issue:: Volume 2000: Issue 008

Language:: English

Publication Date:: 01 Jul 2000

DOI:: https://doi.org/10.5089/9781451970951.003

ISBN:: 9781451970951

ISSN:: 1564-5193

Pages:: 24

Keywords:: PDP; cost; financing; investor; debt issue; risk appetite; Debt management; foreign currency denominated sovereign debt; currency denomination; currency composition; currency diversification of debt issue; funding cost; currency risk premium; bill issuance; foreign exchange position; currency diversification; rate risk; foreign currency reserve; Currencies; Government debt management; International capital markets; Exchange rate risk

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

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The past decade has witnessed a steady increase in outstanding external sovereign debt issued by emerging market economies. This paper examines some of the “received wisdom” regarding the benefits of external financing of domestic budget deficits and argues that it is often predicated on a narrow set of assumptions and incomplete evaluation of the underlying costs. The paper also suggests alternative sources of financing that can help capture some of the benefits associated with foreign financing without all of its costs.

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IMF Policy Discussion Papers

ISSN:: 1564-5193

Publisher:: International Monetary Fund

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