Christoph Yew 
Sovereign Debt Crisis and International Financial Architecture 

Seminar paper from the year 2006 in the subject Business economics – Economic Policy, grade: 2.0, University of Osnabrück (Fachbereich Internationale Wirtschaftspolitik), course: Schuldenkrisen, language: English, abstract: If we have a look at the composition of total debt of different countries it is easy to
see (Figure 1.2) that from 1992 to 2002 the advanced countries’ total debts mainly
consisted of domestic currency, whereas those of emerging market countries where
mainly borrowed in foreign currency. If we focus our view on sovereign debt only,
this difference vanishes. From 1980 to 2003 about 99.7 percent (Table 1) of sovereign
debt in emerging market countries was borrowed in foreign currency. In advanced
economies it was slightly less (92.5%). Nevertheless, in both cases the U.S. dollar was
the dominating foreign currency. A reason for this might be that this currency is
considered as very important in international trade.
A comparison between these facts leads me to the conclusion that private persons in
advanced countries trust their own currency, whereas private persons in emerging
market economies seem to trust foreign currencies. Otherwise the currency
composition between total debt and sovereign debt would not differ so much from
each other. Another interesting fact concerns which other currencies states prefer to
borrow in. They like advanced economies’ currencies instead those of emerging
market countries.
Another important point concerning public debt structure is their composition
structure concerning maturity. It can be seen (Figure 4.2) that during 1988 the average
maturity of sovereign debt issued in both kinds of countries was little below 8 years.
But during the following 14 years the average maturity rate in emerging market
countries decreased to about 5 years while the maturity rate of advanced countries
sovereign debt increased to almost 10 years. This tendency towards short-term debt
can also be seen on Figure 4.1. It is interesting to note the fall in 1999 in both markets
(Figure 4.2) which was nevertheless stronger in emerging countries.[…]