Winning Proposal to the Organski Scholar's Fund: 2013 Competition

Project Title: Indebted Disputes: Foreign-Currency Denominated Debt and Trade Disputes

Faculty Sponsors: Andrew Kerner

Graduate Student: Timm Betz

Project Description

Many countries finance their government debt primarily by issuing bonds denominated in foreign currencies. Barry Eichengreen, Ricardo Hausmann and others have argued that the inability to borrow in domestic currency – what they call “original sin” – leads countries to horde hard currency reserves and thus poses severe problems for the conduct of monetary policy. This project argues that the sensitivity to foreign currency reserves induced by original sin also leads countries to purse trade disputes more aggressively at the WTO in order to protect trade-based access to hard currency.