Publication

This paper looks at Latin American and Caribbean countries to examine the use of local currencies to issue debt. It argues that being able to issue external debt in a domestic currency is valuable principally for risk-sharing motives. However, global currency markets remain dominated by the US dollar and a very few other global currencies. The author regards the massive liquidity advantage of more widely used currencies, such as the dollar, as one reason why emerging economies continue to find it economically efficient to issue external debt in foreign currency rather than the local one.