We explore a model intended to capture the interaction between exchange rate policy, fiscal policy, and outright default on foreign-currency denominated debt. We examine how the exchange rate affects the supply of short-term debt facing the government. We show that under a credible hard peg...

This paper examines the issue of whether the money supply can serve as a nominal anchor for the domestic price level under real exchange rate targeting. When capital controls are perfect so that there is complete separation between official and unofficial markets for foreign exchange, the...

This paper analyzes the macroeconomic effects of a variety of exogenous and policy-induced real disturbances when the authorities target the level of the real exchange rate. It first discusses the implications--particularly for inflation and the current account--of targeting the rate at an...

This paper empirically analyzes how exchange rate policy affects the issuance and pricing of international bonds for developing countries. We find that countries with less flexible exchange rate regimes pay higher sovereign bond spreads and are less likely to issue bonds. Quantitatively,...

We test the hypothesis of a link between exchange rate policy and sovereign bonds. We analyze the effect of exchange rate policies on supply and credit spreads of sovereign bonds issued by developing countries. An exchange rate policy is captured by the de facto exchange rate regime and the real...