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Local Currency Bond Markets

  • John D. Burger

    (International Monetary Fund)

  • Francis E. Warnock

    (International Monetary Fund)

This paper analyzes the development of 49 local bond markets. The 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 foreigncurrency-denominated bonds. The results suggest that "original sin" is a misnomer. Emerging economies are not inherently dependent on 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. Copyright 2006, International Monetary Fund

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Article provided by Palgrave Macmillan in its journal IMF Staff Papers.

Volume (Year): 53 (2006)
Issue (Month): si ()
Pages: 7

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Handle: RePEc:pal:imfstp:v::y:2006:i:si:p:7
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  1. Jeanne, Olivier, 2003. "Why Do Emerging Economies Borrow in Foreign Currency?," CEPR Discussion Papers 4030, C.E.P.R. Discussion Papers.
  2. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank.
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  10. Peter L. Rousseau & Richard Sylla, 2001. "Financial Systems, Economic Growth, and Globalization," Vanderbilt University Department of Economics Working Papers 0119, Vanderbilt University Department of Economics.
  11. Fukuda, Shin-ichi & Hoshi, Takeo & Ito, Takatoshi & Rose, Andrew, 2006. "International Finance," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 455-458, December.
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  13. Claessens, Stijn & Klingebiel, Daniela & Schmukler, Sergio, 2003. "Government bonds in domestic and foreign currency: the role of macroeconomic and institutional factors," Policy Research Working Paper Series 2986, The World Bank.
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  15. Impavido, Gregorio & Musalem, Alberto R. & Tressel, Thierry, 2003. "The impact of contractual savings institutions on securities markets," Policy Research Working Paper Series 2948, The World Bank.
  16. Ross Levine, 2002. "Bank-Based or Market-Based Financial Systems: Which is Better?," NBER Working Papers 9138, National Bureau of Economic Research, Inc.
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  18. Olivier Jeanne, 2003. "Why Do Emerging Economies Borrow in Foreign Currency?," IMF Working Papers 03/177, International Monetary Fund.
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