More borrowing by firms in the domestic currency

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More borrowing by firms in the domestic currency is one way to reduce currency mismatch. What would be the major issue if government insured repayment of the loans at a low cost?

It would be too expensive.

There would be lots of new borrowing, and the production sector might not be able to keep pace.

It is likely that no new borrowing would take place—firms need the incentive of tax breaks.

There could be a moral hazard problem with excessive risk taking.

Reference no: EM13984260

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