In many cases, the response was that the party with the most information bore the exchange rate risk - i.e. the domestic borrower borrowed in foreign currency.
It was not irrational to expect exchange rates to remain reasonably stable, not only because policy in these countries had succeeded in keeping a high degree of stability over a reasonably long period of time, but also because (based on our earlier argument) they might have expected, if anything, the exchange rate to appreciate over time, which would have reduced the cost of their overseas 9 borrowing.