Public debt and the dollar

Aaron Mehrotra

doi:10.3326/

Public debt and the dollar

Authors

Aaron Mehrotra Bank for International Settlements, Basel, Switzerland Author https://orcid.org/0000-0001-8822-6255

DOI:

https://doi.org/10.3326/

Keywords:

public debt, fiscal policy, broad dollar exchange rate

Abstract

We examine the relationship between the broad dollar exchange rate and public debt, using a global panel of over 140 countries. We show that a broad dollar appreciation is associated with higher public debt in the medium run. This pattern is mostly driven by emerging market and developing economies. We further show that it occurs especially in countries that have higher shares of FX debt and for which the market perceptions of debt sustainability are more adverse.

Downloads

Published

2026-03-18

Issue

Vol. 50 No. 1 (2026)

Section

Articles

License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

If accepted for publication, the authors will be asked to sign a Licence to Publish. Authors retain the copyright on the papers published in PSE but grant the right of publication to the journal.

Authors must obtain the right to use copyright material (e.g. maps, drawings, literary quotes, lyrics) from its owner before publishing the paper in PSE.

PSE is an Open Access Journal licensed under the Creative Commons Attribution-Non/Commercial 4.0 International License, which permits non-commercial use and redistribution, as long as the licensed work is passed along unchanged and in whole, with credit to PSE as its original publisher.

The authors can make the results of their accepted papers available before they are published in PSE on preprint platforms, blogs, and other informal communication channels by providing a link to the PSE website and noting that the manuscript will be published in PSE.

For complete information on copyright, please see Ethical guidelines for publication in PSE