IDEAS home Printed from https://ideas.repec.org/a/wsi/jicepx/v04y2013i03ns1793993313500166.html
   My bibliography  Save this article

Foreign Participation In Local Currency Bond Markets Of Emerging Economies

Author

Listed:
  • SHANAKA J. PEIRIS

    (International Monetary Fund, 700 19th Street, N. W. Washington DC 20431, USA)

Abstract

This paper estimates the impact of foreign participation in determining long-term local currency government bond yields and volatility in a group of emerging markets (EMs) from 2000 to 2009. The results of a panel data analysis of 10 EMs show that greater foreign participation in the domestic government bond market tends to significantly reduce long-term government yields. Moreover, greater foreign participation does not necessarily result in increased volatility in bond yields in EMs and, in fact, could even dampen volatility in some instances.

Suggested Citation

  • Shanaka J. Peiris, 2013. "Foreign Participation In Local Currency Bond Markets Of Emerging Economies," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(03), pages 1-15.
    • Handle: RePEc:wsi:jicepx:v:04:y:2013:i:03:n:s1793993313500166
    DOI: 10.1142/S1793993313500166
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S1793993313500166
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S1793993313500166?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Mr. Sanjeev Gupta & Mr. Amine Mati & Mr. Emanuele Baldacci, 2008. "Is it (Still) Mostly Fiscal? Determinants of Sovereign Spreads in Emerging Markets," IMF Working Papers 2008/259, International Monetary Fund.
    2. Suzan Hol, 2006. "Determinants of long-term interest rates in the Scandinavian countries," Discussion Papers 469, Statistics Norway, Research Department.
    3. Olivier J. Blanchard, 1991. "Current and Anticipated Deficits, Interest Rates and Economic Activity," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 361-390, National Bureau of Economic Research, Inc.
    4. Mr. Pipat Luengnaruemitchai & Ms. Li L Ong, 2005. "An Anatomy of Corporate Bond Markets: Growing Pains and Knowledge Gains," IMF Working Papers 2005/152, International Monetary Fund.
    5. Bank for International Settlements, 2002. "The development of bond markets in emerging economies," BIS Papers, Bank for International Settlements, number 11.
    6. Mr. Manmohan S. Kumar & Mr. David Hauner, 2006. "Fiscal Policy and Interest Rates: How Sustainable Is The “New Economy”?," IMF Working Papers 2006/112, International Monetary Fund.
    7. Hans J. Blommestein & Javier Santiso, 2007. "New Strategies for Emerging Domestic Sovereign Bond Markets," OECD Development Centre Working Papers 260, OECD Publishing.
    8. Mr. Manmohan S. Kumar & Mr. Emanuele Baldacci, 2010. "Fiscal Deficits, Public Debt, and Sovereign Bond Yields," IMF Working Papers 2010/184, International Monetary Fund.
    9. Sebastian Edwards, 1998. "Interest Rate Volatility, Capital Controls, and Contagion," NBER Working Papers 6756, National Bureau of Economic Research, Inc.
    10. Daniel, L., 2008. "Foreign investors’ participation in emerging market economies’ domestic bond markets," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 12, pages 61-77, Summer.
    11. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
    12. Blommestein Hans J & Santiso Javier, 2007. "New Strategies for Emerging Domestic Sovereign Bond Markets in the Global Financial Landscape," Global Economy Journal, De Gruyter, vol. 7(2), pages 1-58, June.
    13. Kiatchai Sophastienphong & Yibin Mu & Carlotta Saporito, 2008. "South Asian Bond Markets : Developing Long-Term Finance for Growth," World Bank Publications - Books, The World Bank Group, number 6584, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pandolfi, Lorenzo & Williams, Tomas, 2019. "Capital flows and sovereign debt markets: Evidence from index rebalancings," Journal of Financial Economics, Elsevier, vol. 132(2), pages 384-403.
    2. International Monetary Fund, 2017. "Philippines: Selected Issues," IMF Staff Country Reports 2017/335, International Monetary Fund.
    3. Antoine GODIN & Sakir-Devrim YILMAZ, 2020. "Modelling Small Open Developing Economies in a Financialized World: A Stock-Flow Consistent Prototype Growth Model," Working Paper 5eb7e0e8-560f-4ce6-91a5-5, Agence française de développement.
    4. International Monetary Fund, 2016. "Asean-5 Cluster Report: Evolution of Monetary Policy Frameworks," IMF Staff Country Reports 2016/176, International Monetary Fund.
    5. Hideaki Matsuoka, 2022. "Debt Intolerance: Threshold Level and Composition," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(4), pages 894-932, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jamel Boukhatem, 2009. "Essai sur les déterminants empiriques de développement des marchés obligataires," Working Papers hal-04140858, HAL.
    2. Jamel Boukhatem, 2009. "Essai sur les déterminants empiriques de développement des marchés obligataires," EconomiX Working Papers 2009-32, University of Paris Nanterre, EconomiX.
    3. Eichler, Stefan & Plaga, Timo, 2020. "The economic record of the government and sovereign bond and stock returns around national elections," Journal of Banking & Finance, Elsevier, vol. 118(C).
    4. Miyajima, Ken & Mohanty, M.S. & Chan, Tracy, 2015. "Emerging market local currency bonds: Diversification and stability," Emerging Markets Review, Elsevier, vol. 22(C), pages 126-139.
    5. Dennis Essers & Hans J. Blommestein & Danny Cassimon & Perla Ibarlucea Flores, 2016. "Local Currency Bond Market Development in Sub-Saharan Africa: A Stock-Taking Exercise and Analysis of Key Drivers," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(5), pages 1167-1194, May.
    6. Menna Bizuneh & Menelik Geremew, 2021. "Assessing the Impact of Covid-19 Pandemic on Emerging Market Economies’ (EMEs) Sovereign Bond Risk Premium and Fiscal Solvency," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 47(4), pages 519-545, October.
    7. Ahmed Abdullahi D., 2011. "International Financial Integration, Investment and Economic Performance in Sub-Saharan African Countries," Global Economy Journal, De Gruyter, vol. 11(4), pages 1-28, December.
    8. Konopczak, Michal, 2015. "Government debt holdings of non-residents – an analysis of the impact on selected emerging economies’ sovereign risk," MPRA Paper 68597, University Library of Munich, Germany.
    9. B M, Lithin & chakraborty, Suman & iyer, Vishwanathan & M N, Nikhil & ledwani, Sanket, 2022. "Modeling asymmetric sovereign bond yield volatility with univariate GARCH models: Evidence from India," MPRA Paper 117067, University Library of Munich, Germany, revised 05 Jan 2023.
    10. Ratha, Dilip & De, Supriyo & Kurlat, Sergio, 2018. "Does governing law affect bond spreads?," Emerging Markets Review, Elsevier, vol. 36(C), pages 60-78.
    11. Salvatore Dell’Erba & Emanuele Baldacci & Tigran Poghosyan, 2013. "Spatial spillovers in emerging market spreads," Empirical Economics, Springer, vol. 45(2), pages 735-756, October.
    12. Hassan, M. Kabir & Ngene, Geoffrey M. & Yu, Jung-Suk, 2015. "Credit default swaps and sovereign debt markets," Economic Systems, Elsevier, vol. 39(2), pages 240-252.
    13. Thammarak Moenjak & Kengjai Watjanapukka & Oramone Chantapant & Teeravit Pobsukhirun, 2010. "New Globalization: Risks and Opportunities for Thailand in the Next Decade," Working Papers 2010-04, Monetary Policy Group, Bank of Thailand.
    14. Gilles Dufrénot & Anne-Charlotte Paret, 2018. "Sovereign debt in emerging market countries: not all of them are serial defaulters," Applied Economics, Taylor & Francis Journals, vol. 50(59), pages 6406-6443, December.
    15. Mr. Pipat Luengnaruemitchai & Ms. Li L Ong, 2005. "An Anatomy of Corporate Bond Markets: Growing Pains and Knowledge Gains," IMF Working Papers 2005/152, International Monetary Fund.
    16. Fritz, Barbara & Mühlich, Laurissa, 2007. "South-south monetary integration: the case for a research framework beyond the theory of optimum currency area," Discussion Papers 2007/20, Free University Berlin, School of Business & Economics.
    17. Diego Valderrama & Katheryn N. Russ, 2009. "A Theory of Banks, Bonds, and the Distribution of Firm Size," Working Papers 4, University of California, Davis, Department of Economics.
    18. Jaramillo, Laura & Weber, Anke, 2013. "Bond yields in emerging economies: It matters what state you are in," Emerging Markets Review, Elsevier, vol. 17(C), pages 169-185.
    19. Mwankemwa, Lusajo P. & Ndanshau, Michael O.A., 2021. "Asymmetric Effects of Fiscal Deficit on Monetary Policy Transmission in Tanzania," African Journal of Economic Review, African Journal of Economic Review, vol. 9(4), September.
    20. Fløgstad, Cathrin, 2017. "Domestic bond markets in emerging economies: Crowding in or crowding out?," Working Papers in Economics 15/17, University of Bergen, Department of Economics.

    More about this item

    Keywords

    Bond markets; emerging market economies; E44; G18; H63; O16;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:jicepx:v:04:y:2013:i:03:n:s1793993313500166. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/jicep/jicep.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.