Debt Buildup and Currency Vulnerability: Evidence from Global Markets
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This paper examines how debt buildup is related to currency depreciation pressure. It highlights the importance of a debt surveillance framework that monitors both public and private debt buildup, especially in emerging markets.
The study analyzes a panel dataset of 59 advanced and emerging markets. It finds that both private and public debt exacerbate currency vulnerability, though the evidence of a significant effect on currency depreciation pressure is more robust and consistent for private debt. The authors also find that excessive private debt buildup can be particularly harmful in emerging markets.