Financial stability and local currency bond markets
Introduction Local currency bond markets can help financial stability by reducing currency mismatches and lengthening the duration of debt. Such markets also help economic efficiency by generating market-determined interest rates that reflect the opportunity costs of funds at different maturities. The absence of such markets can lead borrowers to take risky financing decisions that create balance sheet vulnerabilities. Such balance sheet weaknesses played a key role in virtually every major financial crisis affecting the emerging market economies (EMEs) since the early 1980s. This report demonstrates that several major EMEs have effectively addressed this problem during the past decade. Nevertheless, operational risks inevitably arise in a transitional period when nascent markets still lack those features that help the more mature markets to work well even in volatile conditions. This report therefore examines several important challenges in ensuring that comparatively new bond markets function in ways that contribute best to financial stability and economic progress.
|This book is provided by Bank for International Settlements in its series CGFS Papers with number 28 and published in 2007.|
|Contact details of provider:|| Postal: Centralbahnplatz 2, CH - 4002 Basel|
Phone: (41) 61 - 280 80 80
Fax: (41) 61 - 280 91 00
Web page: http://www.bis.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martín Redrado & Jorge Carrera & Diego Bastourre & Javier Ibarlucia, 2006. "The Economic Policy of Foreign Reserve Accumulation: New International Evidence," BCRA Working Paper Series 200614, Central Bank of Argentina, Economic Research Department.
- Kevin Cowan & Erwin Hansen & Luis Oscar Herrera, 2005.
"Currency Mismatches, Balance-Sheet Effects and Hedging in Chilean Non-Financial Corporations,"
Research Department Publications
4387, Inter-American Development Bank, Research Department.
- Kevin Cowan & Erwin Hansen & Luis Oscar Herrera, 2005. "Currency Mismatches, Balance-Sheet Effects and Hedging in Chilean Non-Financial Corporations," IDB Publications (Working Papers) 6825, Inter-American Development Bank.
- Kevin Cowan & Erwin Hansen & Luis Oscar Herrera, 2005. "Currency Mismatches, Balance Sheet Effects and Hedging in Chilean non-Financial Corporations," Working Papers Central Bank of Chile 346, Central Bank of Chile.
- Michael D. Bordo & Christopher Meissner & Angela Redish, 2003. "How "Original Sin" was Overcome: The Evolution of External Debt Denominated in Domestic Currencies in the United States and the British Dominions," NBER Working Papers 9841, National Bureau of Economic Research, Inc.
- Drudi, Francesco & Giordano, Raffaela, 2000. "Erratum to "Default risk and optimal debt management" [Journal of Banking and Finance 24 (6) 861-891]," Journal of Banking & Finance, Elsevier, vol. 24(11), pages 1849-1852, November.
- Camilo E Tovar, 2005. "International government debt denominated in local currency: recent developments in Latin America," BIS Quarterly Review, Bank for International Settlements, December.
- Wolfgang Schulte & Roberto Violi, 2002.
"Interactions between cash and derivatives bond markets: some evidence for the euro area,"
BIS Papers chapters,
in: Bank for International Settlements (ed.), Market functioning and central bank policy, volume 12, pages 222-267
Bank for International Settlements.
- Wolfgang Schulte & Roberto Violi, 2001. "Interactions between cash and derivatives bond markets: some evidence for the euro area," BIS Papers chapters, in: Bank for International Settlements (ed.), The changing shape of fixed income markets: a collection of studies by central bank economists, volume 5, pages 67-112 Bank for International Settlements.
- Morris Goldstein & Philip Turner, 2004. "Controlling Currency Mismatches in Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 373.
- M S Mohanty & Philip Turner, 2006. "Foreign exchange reserve accumulation in emerging markets: what are the domestic implications?," BIS Quarterly Review, Bank for International Settlements, September.
- M S Mohanty, 2002. "Improving liquidity in government bond markets: what can be done?," BIS Papers chapters, in: Bank for International Settlements (ed.), The development of bond markets in emerging economies, volume 11, pages 49-80 Bank for International Settlements.
- Drudi, Francesco & Giordano, Raffaela, 2000. "Default risk and optimal debt management," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 861-891, June.
- Robert T. Price, 1997. "The Rationale and Design of Inflation-Indexed Bonds," IMF Working Papers 97/12, International Monetary Fund.
- Paloma Acevedo & Enrique Alberola & Carmen Broto, 2007. "Local debt expansion... vulnerability reduction? An assessment for six crises-prone countries," Working Papers 0733, Banco de España;Working Papers Homepage.
- John Hawkins, 2002. "Bond markets and banks in emerging economies," BIS Papers chapters, in: Bank for International Settlements (ed.), The development of bond markets in emerging economies, volume 11, pages 42-48 Bank for International Settlements.
- World Bank & International Monetory Fund, 2001. "Developing Government Bond Markets : A Handbook," World Bank Publications, The World Bank, number 13865, February.
- Julien Reynaud & Arnaud Mehl, 2007.
"The determinants of "domestic" original sin in emerging market economies,"
Money Macro and Finance (MMF) Research Group Conference 2006
159, Money Macro and Finance Research Group.
- Mehl, Arnaud & Reynaud, Julien, 2005. "The determinants of ‘domestic’ original sin in emerging market economies," Working Paper Series 0560, European Central Bank.
- Luzi Hail & Christian Leuz, 2006. "International Differences in the Cost of Equity Capital: Do Legal Institutions and Securities Regulation Matter?," Journal of Accounting Research, Wiley Blackwell, vol. 44(3), pages 485-531, 06.
- John D. Burger & Francis E. Warnock, 2003. "Diversification, original sin, and international bond portfolios," International Finance Discussion Papers 755, Board of Governors of the Federal Reserve System (U.S.).
- Serge Jeanneau & Camilo E Tovar, 2006. "Domestic bond markets in Latin America: achievements and challenges," BIS Quarterly Review, Bank for International Settlements, June.
- Martinez, Lorenza & Werner, Alejandro, 2002. "The exchange rate regime and the currency composition of corporate debt: the Mexican experience," Journal of Development Economics, Elsevier, vol. 69(2), pages 315-334, December.
- Marcel Peter & MartÃn Grandes, 2005. "How Important Is Sovereign Risk in Determining Corporate Default Premia? The Case of South Africa," IMF Working Papers 05/217, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:bis:biscgf:28. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Beslmeisl)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.