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Local Currency Bond Markets

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  • John D. Burger
  • Francis E. Warnock

Abstract

We analyze the development of 49 local bond markets. Our main finding is that policies and laws matter: Countries with stable inflation rates and strong creditor rights have more developed local bond markets and rely less on foreign-currency-denominated bonds. The results suggest that "original sin" is a misnomer. Emerging economies are not inherently dependent upon foreign-currency debt. Rather, by improving policy performance and strengthening institutions they may develop local currency bond markets, reduce their currency mismatch, and lessen the likelihood of future crises.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12552.

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Date of creation: Oct 2006
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Publication status: published as Burger, John D., and Francis E. Warnock, 2006. "Local Currency Bond Markets," IMF Staff Papers 53 (Special Issue): 115-132.
Handle: RePEc:nbr:nberwo:12552

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