Abstract
A natural experiment is used to study exchange rate depreciation and perceived sovereign risk. France suspended coinage of silver in 1876 provoking a significant exogenous depreciation of
all silver standard countries versus gold standard currencies like the British pound – the currency in which their debt was payable. The evidence suggests an exchange rate depreciation can significantly increase sovereign risk if a country is exposed to foreign currency debt. We implement a difference-in-differences estimator and find that the average silver country's spread on hard currency debt increased over ten percent relative to non-silver countries.