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Government Bonds in Domestic and Foreign Currency: The Role of Macroeconomic and Institutional Factors

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Author Info
Claessens, Stijn
Klingebiel, Daniela
Schmukler, Sergio

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Abstract

The development of government bond markets and, in particular, their currency composition have recently received much interest, partly because of their relation with financial crises. This Paper studies determinants of the size and currency composition of government bond markets for a panel of developed and developing countries. We find that countries with larger economies, greater domestic investor bases and more flexible exchange rate regimes have larger domestic currency bond markets, while smaller economies rely more on foreign currency bonds. Better institutional frameworks and macroeconomic fundamentals enhance both domestic currency bond markets and increase countries’ ability to issue foreign currency bonds, while they raise the share of foreign exchange bonds.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3789.

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Date of creation: Feb 2003
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Handle: RePEc:cpr:ceprdp:3789

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Related research
Keywords: currency structure; foreign currency debt; government bond markets; government debt; sovereign bonds;

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Find related papers by JEL classification:
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
F34 - International Economics - - International Finance - - - International Lending and Debt Problems
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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