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Does transparency pay? Evidence from IMF data transparency policy reforms and emerging market sovereign bond spreads

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  • Choi, Sangyup
  • Hashimoto, Yuko

Abstract

Does an effort to enhance data transparency pay? We answer this question by analyzing the effect of the data transparency policy reforms, as reflected in subscriptions to the IMF’s Data Standards Initiatives, namely, the Special Data Dissemination Standard (SDDS) and the General Data Dissemination System (GDDS), on the spreads of emerging market sovereign bonds. Employing a short-run event study with daily data, we convincingly show that market participants react to the transparency reform news positively. We then measure its medium-term effect, which is more relevant for economic decisions. By showing that the reform decision is largely independent of a country’s macroeconomic development we mitigate endogeneity issues regarding a decision to adopt such reforms. On average, the adoption of the SDDS and GDDS lead to a 13% reduction in the spreads over one year, following such reforms. This finding is robust to various sensitivity tests, including careful consideration of overlapping events, controlling for additional variables, and a placebo test.

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  • Choi, Sangyup & Hashimoto, Yuko, 2018. "Does transparency pay? Evidence from IMF data transparency policy reforms and emerging market sovereign bond spreads," Journal of International Money and Finance, Elsevier, vol. 88(C), pages 171-190.
    • Handle: RePEc:eee:jimfin:v:88:y:2018:i:c:p:171-190
    DOI: 10.1016/j.jimonfin.2018.08.002
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    More about this item

    Keywords

    Data transparency; Structural reforms; EMBIG spreads; Event study; IMF Data Standards Initiatives; Forecast error;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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