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Costs and benefits of government borrowing in foreign currency: is it a major source of risk for EU member states outside the Euro?
Mislav Brkić*
Review article | Year: 2021 | Pages: 63 - 91 | Volume: 45 | Issue: 1 Received: June 16, 2020 | Accepted: November 10, 2020 | Published online: March 9, 2021
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Note: The simulation is performed assuming that the initial debt-to-GDP ratio is 50%, the primary deficit is zero, the share of foreign currency debt in total government debt equals 70%, the nominal GDP growth rate is 4%, while the weighted nominal interest rate on debt, initially set at 4%, increases following the depreciation of the currency to 5% in t+1, and further to 6% in t+2, remaining stable thereafter. Source: Author.
Sources: ECB SDW; author’s calculation.
* Other factors relate to exchange rate changes and transactions with the EU budget.Source: CNB; author’s calculation.
Source: Eurostat (2020a); author’s calculations.
Sources: Eurostat (2020b); national central banks; author’s calculations.
Source: Eurostat (2020c); national central banks; author’s calculations.
Source: Eurostat (2020a).
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