IDEAS home Printed from https://ideas.repec.org/p/bcb/wpaper/345.html
   My bibliography  Save this paper

International Capital Flows and Yields of Public Debt Bonds

Author

Listed:
  • Márcia Saraiva Leon

Abstract

The paper analyzes nominal yields of five-year fixed-rate Brazilian Domestic Federal Public Debt (DFPD) bonds in response to fluctuations in international net capital flows to Brazil for the period January 2007 to July 2012. The results show that estimation in differences with error correction obtains a long-run relationship between the yield, the foreign participation in the DFPD and the target Selic rate that reproduces previous results. When the ratio of net foreign long-term fixed-income investments relative to GDP is a substitute for foreign participation in the DFPD, the new explanatory variable is also significant in the long run, when the cointegrating equation includes the yield of five-year United States Treasury bonds. In turn, fiscal balance, investors’ risk aversion, output gap, the tax rate on financial transactions made by nonresident investors and the effective rate of reserve requirements influence the yields in the short run.

Suggested Citation

  • Márcia Saraiva Leon, 2014. "International Capital Flows and Yields of Public Debt Bonds," Working Papers Series 345, Central Bank of Brazil, Research Department.
    • Handle: RePEc:bcb:wpaper:345
    as

    Download full text from publisher

    File URL: https://www.bcb.gov.br/content/publicacoes/WorkingPaperSeries/wps345.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mr. Manmohan S. Kumar & Mr. Emanuele Baldacci, 2010. "Fiscal Deficits, Public Debt, and Sovereign Bond Yields," IMF Working Papers 2010/184, International Monetary Fund.
    2. Tillmann, Peter, 2013. "Capital inflows and asset prices: Evidence from emerging Asia," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 717-729.
    3. Mr. Shanaka J Peiris, 2010. "Foreign Participation in Emerging Markets’ Local Currency Bond Markets," IMF Working Papers 2010/088, International Monetary Fund.
    4. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    5. 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.
    6. Jack Favilukis & David Kohn & Sydney C. Ludvigson & Stijn Van Nieuwerburgh, 2012. "International Capital Flows and House Prices: Theory and Evidence," NBER Chapters, in: Housing and the Financial Crisis, pages 235-299, National Bureau of Economic Research, Inc.
    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. Kpughur Moses Tule & Osana Jackson Odonye & Udoma Johnson Afangideh & Godday Uwawunkonye Ebuh & Elijah Abasifreke Paul Udoh & Augustine Ujunwa, 2019. "Assessing the spillover effects of U.S. monetary policy normalization on Nigeria sovereign bond yield," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-16, December.
    2. Carlos Góes & Herman Kamil & Phil De Imus & Ms. Mercedes Garcia-Escribano & Mr. Roberto Perrelli & Mr. Shaun K. Roache & Jeremy Zook, 2017. "Spillovers from U.S. Monetary Policy Normalization on Brazil and Mexico’s Sovereign Bond Yields," IMF Working Papers 2017/050, International Monetary Fund.

    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. Laura Jaramillo & Miss Anke Weber, 2013. "Global Spillovers into Domestic Bond Markets in Emerging Market Economies," IMF Working Papers 2013/264, International Monetary Fund.
    2. Huang, Tao & Wu, Fei & Yu, Jing & Zhang, Bohui, 2015. "International political risk and government bond pricing," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 393-405.
    3. 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.
    4. Mr. Julio Escolano & Ms. Christina Kolerus & Mr. Constant A Lonkeng Ngouana, 2014. "Global Monetary Tightening: Emerging Markets Debt Dynamics and Fiscal Crises," IMF Working Papers 2014/215, International Monetary Fund.
    5. Nicolás Álvarez H. & Antonio Fernandois S. & Andrés Sagner T., 2019. "Rol de inversionistas institucionales domésticos sobre la volatilidad de tasas soberanas de economías emergentes," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 22(1), pages 082-101, April.
    6. Gadanecz, Blaise & Miyajima, Ken & Shu, Chang, 2018. "Emerging market local currency sovereign bond yields: The role of exchange rate risk," International Review of Economics & Finance, Elsevier, vol. 57(C), pages 371-401.
    7. Nasir, Muhammad Ali & Le, Thi Ngoc Lan & Ghabri, Yosra & Huynh, Luu Duc Toan, 2023. "Sovereign bonds and flight to safety: Implications of the COVID-19 crisis for sovereign debt markets in the G-7 and E-7 economies," International Review of Financial Analysis, Elsevier, vol. 86(C).
    8. 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 (IOB).
    9. Banti, Chiara & Phylaktis, Kate, 2019. "Global liquidity, house prices and policy responses," Journal of Financial Stability, Elsevier, vol. 43(C), pages 79-96.
    10. Conterius, Simeon & Akimov, Alexandr & Su, Jen-Je & Roca, Eduardo, 2023. "Do foreign investors have a positive impact on the domestic government bonds market? A panel pooled mean group approach," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 863-875.
    11. Tanweer Akram & Anupam Das, 2017. "The Dynamics of Government Bond Yields in the Eurozone," Economics Working Paper Archive wp_889, Levy Economics Institute.
    12. Matthew S. Yiu & Sahminan Sahminan, 2017. "Global Liquidity, Capital Inflows and House Prices in ASEAN Economies," International Real Estate Review, Global Social Science Institute, vol. 20(1), pages 105-126.
    13. Agur, Itai & Chan, Melissa & Goswami, Mangal & Sharma, Sunil, 2019. "On international integration of emerging sovereign bond markets," Emerging Markets Review, Elsevier, vol. 38(C), pages 347-363.
    14. Ngan Tran, 2019. "Asymmetric effects of fiscal balance on monetary variables: evidence from large emerging economies," Empirical Economics, Springer, vol. 57(3), pages 1045-1076, September.
    15. Tanweer Akram & Huiqing Li, 2020. "Some Empirical Models of Japanese Government Bond Yields Using Daily Data," Economics Working Paper Archive wp_962, Levy Economics Institute.
    16. Tanweer Akram & Anupam Das, 2018. "Australian Government Bonds' Nominal Yields: An Empirical Analysis," Economics Working Paper Archive wp_910, Levy Economics Institute.
    17. Borri, Nicola, 2018. "Local currency systemic risk," Emerging Markets Review, Elsevier, vol. 34(C), pages 111-123.
    18. Hristov, Nikolay & Hülsewig, Oliver & Wollmershäuser, Timo, 2020. "Capital flows in the euro area and TARGET2 balances," Journal of Banking & Finance, Elsevier, vol. 113(C).
    19. Tanweer Akram & Huiqing Li, 2016. "The Empirics of Long-Term US Interest Rates," Economics Working Paper Archive wp_863, Levy Economics Institute.
    20. Saungweme, Talknice & Odhiambo, Nicholas M., 2020. "The Impact of Domestic and Foreign Public Debt on Economic Growth: Empirical Evidence from Zimbabwe," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(1), pages 77-106.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:bcb:wpaper:345. 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: Rodrigo Barbone Gonzalez (email available below). General contact details of provider: https://www.bcb.gov.br/en .

    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.