We develop a dual currency search model to study equilibrium currency exchange and the determination of nominal … numerical methods to solve for the steady-state distributions of currency portfolios, nominal exchange rates and value functions …. When one of the currencies is 'risky', equilibria exist in which the safe currency trades for multiple units of the risky …

We develop a dual currency search model to study equilibrium currency exchange and the determination of nominal … numerical methods to solve for the steady-state distributions of currency portfolios, nominal exchange rates and value functions …. When one of the currencies is 'risky', equilibria exist in which the safe currency trades for multiple units of the risky …

We document that governments whose local currency debt provides them with greater hedging benefits actually borrow more … in foreign currency. We introduce two features into a government's debt portfolio choice problem to explain this finding …-cyclical inflation ex post, which leads risk-averse lenders to require a risk premium ex ante. This makes local currency debt too …

We document that governments whose local currency debt provides them with greater hedging benefits actually borrow more … in foreign currency. We introduce two features into a government's debt portfolio choice problem to explain this finding …-cyclical inflation ex post, which leads risk-averse lenders to require a risk premium ex ante. This makes local currency debt too …

We document that governments whose local currency debt provides them with greater hedging benefits actually borrow more … in foreign currency. We introduce two features into a government's debt portfolio choice problem to explain this finding …-cyclical inflation ex post, which leads risk-averse lenders to require a risk premium ex ante. This makes local currency debt too …

more foreign-currency debt. We propose that monetary policy credibility explains the currency composition of sovereign debt … significantly larger nominal bond risk premia and borrow less in local currency …