Financial Instability under a Flexible Exchange Rate

Many governments in developing countries contemplate the possibility of increasing the flexibility of their exchange rates despite having accumulated substantial dollar-denominated debt. Using a model of corporate dollar debt in which the future exchange rate is uncertain, this paper studies the financial risks that might arise as a consequence of increased exchange rate flexibility.

BESANCENOT, D. and VRANCEANU, R. (2007). Financial Instability under a Flexible Exchange Rate. Scandinavian Journal of Economics, pp. 291-302.

Keywords : #Anticipations-rationnelles, #Crises-financières, #Dette-en-dollars, #PVDs, #Rational-Expectations, #Taux-de-change