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Does Macroeconomic Transparency Help Governments Be Solvent?: Evidence From Recent Data

In: Risk Management And Value Valuation and Asset Pricing

Author

Listed:
  • Ramzi Mallat

    (EM Lyon Business School & University of Lyon 2, 88 Rue Pasteur, 69007 Lyon, France)

  • Duc Khuong Nguyen

    (ISC Paris School of Management, 22 Boulevard du Fort de Vaux, 75848 Paris, cedex 17, France)

Abstract

This chapter investigates whether macroeconomic and data transparency standards lead to lower borrowing costs in sovereign bond markets. We essentially show that emerging market countries which subscribed to the Special Data Dissemination Standard (SDDS) experienced a significant decline in borrowing cost proxied by sovereign yield spreads on secondary markets. However, the adherence of these markets to the Code of Good Practices on Transparency in Monetary and Financial Policies caused a significant increase in the yield spreads. There is no impact of the adherence to the Code of Good Practices in Fiscal Transparency on the changes of sovereign spreads. In addition, the results suggest that a debtor country's internal liquidity factor (measured by the total reserves to total external debt service ratio) and external liquidity conditions (measured by the yield on US long-term bond) are the most important determinants of emerging market spreads.

Suggested Citation

  • Ramzi Mallat & Duc Khuong Nguyen, 2008. "Does Macroeconomic Transparency Help Governments Be Solvent?: Evidence From Recent Data," World Scientific Book Chapters, in: Mondher Bellalah & Jean-Luc Prigent & Jean-Michel Sahut & Georges Pariente & Olivier Levyne & Michel (ed.), Risk Management And Value Valuation and Asset Pricing, chapter 25, pages 615-631, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812770745_0025
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Systems; Standards; Regimes; Government and the Monetary System
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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