The Banking Sector, Government Bonds and Financial Intermediation: The Case of Emerging Market Countries
AbstractThis paper develops an analytical framework to explore how financial sector characteristics shape domestic debt dynamics in emerging market economies. Our analysis suggests that the more competitive the banking sector and the more liquid and deeper the deposit market, the better would be the conditions in the public securities market. Our results also reveal that the lower the financial depth, the greater the scale of private sector credits that are crowded-out by public borrowing. To the extent that credit availability is associated with improved productivity and better output performance, the lack of financial depth in emerging market countries implies that extensive domestic borrowing in these countries may have consequences far beyond the concern with fiscal sustainability. As such, our results higlight the importance of developing domestic debt markets for financial and macroeconomic stability.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 08/11.
Date of creation: May 2008
Date of revision:
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Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
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Financial sector; public debt; cost of borrowing.;
Other versions of this item:
- F. Gulcin Ozkan & Ahmet Kipici & Mustafa Ismihan, 2010. "The Banking Sector, Government Bonds, and Financial Intermediation: The Case of Emerging Market Countries," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 46(4), pages 55-70, January.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-07 (All new papers)
- NEP-BAN-2008-06-07 (Banking)
- NEP-CWA-2008-06-07 (Central & Western Asia)
- NEP-MAC-2008-06-07 (Macroeconomics)
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