2021 UCL Centre for Finance Annual Lecture

Title: Overcoming “Original Sin” to Secure Policy Space

Abstract: Fiscal policy took the lead in the policy response to the pandemic, both in advanced and emerging economies. Emerging economies have largely overcome “Original Sin” since the spate of crises in the 1990s, managing to cultivate a global investor base in local currency sovereign bonds. However, overcoming Original Sin has not insulated them from the fluctuations in global financial conditions, as the currency mismatch has migrated from the borrower’s balance sheet to the investors’ balance sheets, giving rise to “Original Sin Redux”. This presentation reviews the current state of play, and introduces several analytical tools that bring this important topic to the heart of the research agenda. It concludes with a number of policy implications for overcoming “Original Sin Redux”.