The Impact of Exchange Rate Risk on Moldova’s External Debt - Depreciation of the Leu and the Burden on the National Currency

Abstract

External debt remains to this day a topic of great importance. In the current economic context in which the Republic of Moldova finds itself, we may conclude that the country is over-indebted, while exchange rate fluctuations and the depreciation of the Moldovan leu represent only some of the influencing factors. The purpose of this paper is to highlight the impact of exchange rate risk on external debt, as well as the burden placed on the national curency. In this research, we have used both qualitative and quantitative methods in order to analyze the impact of exchange rate risk and its influence on the level of indebtedness of the Republic of Moldova. Also, the research is based on descriptive, comparative and structural analysis methods. Statistical data provided by national institutions such as BNM, were used to examine the evolution of external debt and exchange rate fluctuations and a causal analysis was applied in order to assess the relationship between currency depreciation and the increase in the debt burden. CZU: [336.745:330.131.7]:[336.273.3:336.74](478); JEL: H63, F34, F31