Foreign debt mismanagement in emerging economies leads to financial instability.
The study looked at how countries manage their foreign debts. They found that in many emerging economies, the way they handle their debts in different currencies is not very efficient. The researchers looked at data from 14 countries between 1970 and 1998. They focused on debts in U.S. dollars, deutsche marks, Japanese yen, and Swiss francs. The results showed that these countries did not adjust their debt portfolios well when some currencies got stronger compared to the U.S. dollar.
