Government Bonds in Domestic and Foreign Currency: the Role of Institutional and Macroeconomic Factors
AbstractIn contrast to some recent research, this paper finds that institutional and macroeconomic factors are related to the depth and currency composition of government bond markets. Using panel data for developed and emerging economies, we find several factors to be systematically associated with bond markets. Aside from economic size (already shown to affect the currency composition), this paper shows that investor bases matter. Economies with deeper domestic financial systems (measured by bank deposits and stock market capitalization) have larger domestic currency bond markets and issue less foreign currency debt, whereas foreign investor demand is positively related to the size and share of foreign currency bonds. Moreover, less flexible exchange rate regimes are associated with more foreign currency issuance. Other relevant variables include inflation, fiscal burden, legal origin, and capital account openness. Copyright � 2007 The Authors; Journal compilation � 2007 Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of International Economics.
Volume (Year): 15 (2007)
Issue (Month): 2 (05)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576
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- Melecky, Martin, 2010.
"Choosing the Currency Structure of Foreign-currency Debt: a Review of Policy Approaches,"
21268, University Library of Munich, Germany.
- Martin Melecky, 2012. "Choosing The Currency Structure Of Foreign‐Currency Debt: A Review Of Policy Approaches," Journal of International Development, John Wiley & Sons, Ltd., vol. 24(2), pages 133-151, 03.
- Essers, Dennis & Cassimon, Danny, 2012. "Washing away original sin: vulnerability to crisis and the role of local currency bonds in Sub-Saharan Africa," IOB Working Papers 2012.12, Universiteit Antwerpen, Institute of Development Policy and Management (IOB).
- Ken Miyajima & Madhusudan Mohanty & Tracy Chan, 2012. "Emerging market local currency bonds: diversification and stability," BIS Working Papers 391, Bank for International Settlements.
- Axel Lindner & Alexander Ludwig, 2009. "A simple macro model of Original Sin based on optimal price setting under incomplete information," International Economics and Economic Policy, Springer, vol. 6(4), pages 345-359, December.
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