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Foreign Participation in Emerging Markets’ Local Currency Bond Markets

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  • Shanaka J. Peiris
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    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 from 2000-2009. The results of a panel data analysis of 10 emerging markets 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 emerging markets and, in fact, could even dampen volatility in some instances.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=23695
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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/88.

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    Length: 20
    Date of creation: 01 Apr 2010
    Date of revision:
    Handle: RePEc:imf:imfwpa:10/88

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    Postal: International Monetary Fund, Washington, DC USA
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    Keywords: Capital inflows; Foreign investment; bond; bond yields; bond markets; government bond; government bond yields; bond market; government bond markets; bonds; bond yield; government bond market; domestic bond markets; domestic bond; domestic government bond; domestic bond market; local currency bond; bond yield volatility; international financial statistics; government bonds; financial stability; domestic bonds; local bond; corporate bond; government bond yield; government securities; local bond markets; corporate bond markets; capital markets; hedge funds; local currency bond markets; bond prices; risk aversion; rate bonds; current account balance; capital flows; debt securities; mature markets; bond funds; dollar bonds; financial economics; corporate bonds; bond market developments; sovereign bond; hedge; derivative markets; development of bond markets; international bonds; bond issuance; bond price; bond turnover; bond market development; equity markets; financial markets; treasury bond; global bond; option pricing; derivative; capital controls; derivatives markets; financial system; domestic bond market developments; long-term bond yields; term bond; denominated bond; capital loss; developing government bond; securities markets; sovereign bond market; securities ? markets; asset bubbles; local currency bond market; financial institutions; sovereign bond markets; developing government bond markets; international reserves; currency of denomination; stock adjustment; international finance; stock of debt; financial market; development of corporate bond markets; local bond market; domestic government bonds; treasury bond yield; financial fragility; currency risk; current account deficit;

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    Cited by:
    1. 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.

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