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A structural model of sovereign debt issuance: assessing the role of financial factors

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  • Aitor Erce

    ()
    (Banco de España)

Abstract

The role that domestic and international financial conditions have in shaping developing countries’ governments’ debt structure is structurally estimated using data on individual bond issuance. The structural model, which uses financial and demographic conditions to achieve identification, is used to estimate three key characteristics of sovereign bonds: issue size, maturity and spread. To minimize sample selection concerns, in a first step, the issuance decision is studied by means of a probit model. Results show that better developed domestic financial markets and looser international financial conditions raise developing countries ability to tap international markets and, mainly through their effect on the spreads, are important determinants of the observed debt structure. We find evidence of complementarities between domestic financial deepening and financing conditions in global markets.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/08/Fic/dt0809e.pdf
File Function: First version, June 2008
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0809.

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Length: 39 pages
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:bde:wpaper:0809

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Keywords: sovereign debt; financial markets; global liquidity; structural analysis;

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  1. Masciandaro, D. & Nieto, M. & Prast, H.M., 2007. "Financial Governance of Banking Supervision," Open Access publications from Tilburg University urn:nbn:nl:ui:12-381469, Tilburg University.
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Cited by:
  1. Udaibir S. Das & Michael G. Papaioannou & Christoph Trebesch, 2010. "Sovereign Default Risk and Private Sector Access to Capital in Emerging Markets," IMF Working Papers 10/10, International Monetary Fund.
  2. Aitor Erce, 2012. "Does the IMF´s official support affect sovereign bond maturities?," Banco de Espa�a Working Papers 1231, Banco de Espa�a.
  3. Aitor Erce, 2012. "Does the IMF's official support affect sovereign bonds maturities?," Globalization and Monetary Policy Institute Working Paper 128, Federal Reserve Bank of Dallas.
  4. Swamy, Vighneswara, 2013. "Euro Zone Debt Crisis: Implications for Indian Banking Sector," MPRA Paper 47658, University Library of Munich, Germany.
  5. Broto, Carmen & Díaz-Cassou, Javier & Erce, Aitor, 2011. "Measuring and explaining the volatility of capital flows to emerging countries," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 1941-1953, August.
  6. Carmen Broto & Javier Díaz-Cassou & Aitor Erce-Domínguez, 2008. "Measuring and explaining the volatility of capital flows towards emerging countries," Banco de Espa�a Working Papers 0817, Banco de Espa�a.

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