Abstract Public foreign currency borrowing is a common problem of emerging markets. Scholars named it the original sin of foreign debt. It has a proven negative influence on economic growth and development, undermining financial stability, and increasing the probability of monetary crises. The roots of the original sin often lay in emerging markets’ institutional underdevelopment, with low-quality monetary policy, inappropriate exchange rate regime choice, and exchange rate mismanagement being stated among the most important causes. This paper evaluates the influence of the exchange rate policy on the emission of foreign currency sovereign bonds in emerging markets. The relationship is estimated using panel data and GMM approach, with exchange rate regime type (both de jure and de facto) and real exchange rate volatility serving as explanatory variables. The findings reveal that fixed exchange rate regime and high real exchange rate volatility is promoting the foreign currency borrowing. Thus countries that want to reduce the burden of the original sin should lean towards a more flexible exchange rate policy while maintaining their real exchange rate stable.

中文翻译：

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新兴市场汇率制度，实际汇率波动率与政府债券货币结构之间的关系

摘要公共外币借贷是新兴市场的普遍问题。学者们称其为外债的原始罪过。事实证明，它对经济增长和发展具有负面影响，破坏了金融稳定，并增加了发生货币危机的可能性。最初犯罪的根源通常在于新兴市场的机构发展不足，最主要的原因是低质量的货币政策，不适当的汇率制度选择和汇率管理不善。本文评估了汇率政策对新兴市场中外币主权债券发行的影响。该关系是使用面板数据和GMM方法估算的，以汇率制度类型（法律上和事实上的）和实际汇率波动作为解释变量。研究结果表明，固定汇率制度和较高的实际汇率波动性正在促进外币借贷。因此，想要减轻原罪负担的国家应该在维持其实际汇率稳定的同时，采取更灵活的汇率政策。