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A structural model of sovereign debt issuance: assessing the role of financial factors

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  • Aitor Erce

    (Banco de España)

Abstract

The role that domestic and international financial conditions have in shaping developing countries’ governments’ debt structure is structurally estimated using data on individual bond issuance. The structural model, which uses financial and demographic conditions to achieve identification, is used to estimate three key characteristics of sovereign bonds: issue size, maturity and spread. To minimize sample selection concerns, in a first step, the issuance decision is studied by means of a probit model. Results show that better developed domestic financial markets and looser international financial conditions raise developing countries ability to tap international markets and, mainly through their effect on the spreads, are important determinants of the observed debt structure. We find evidence of complementarities between domestic financial deepening and financing conditions in global markets.

Suggested Citation

  • Aitor Erce, 2008. "A structural model of sovereign debt issuance: assessing the role of financial factors," Working Papers 0809, Banco de España.
    • Handle: RePEc:bde:wpaper:0809
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    Cited by:

    1. Das, Udaibir S. & Papaioannou, Michael G. & Trebesch, Christoph, . "Sovereign Default Risk and Private Sector Access to Capital in Emerging Markets," Chapters in Economics,, University of Munich, Department of Economics.
    2. Broto, Carmen & Díaz-Cassou, Javier & Erce, Aitor, 2011. "Measuring and explaining the volatility of capital flows to emerging countries," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 1941-1953, August.
    3. Diego Bastourre & Jorge Carrera & Javier Ibarlucia, 2008. "Commodity Prices in Argentina. What Does Move the Wind?," Money Affairs, CEMLA, vol. 0(1), pages 1-30, January-J.
    4. Carmen Broto & Javier Díaz-Cassou & Aitor Erce-Domínguez, 2008. "The Sources of Capital Flows Volatility: Empirical Evidence for Emerging Countries," Money Affairs, CEMLA, vol. 0(1), pages 93-128, January-J.
    5. Aitor Erce, 2012. "Does the IMF´s official support affect sovereign bond maturities?," Working Papers 1231, Banco de España.
    6. Xiomara Archibald & Denny Lewis-Bynoe & Winston Moore, 2008. "Labour Market Flexibility in Small Island Developing States," Money Affairs, CEMLA, vol. 0(1), pages 73-91, January-J.
    7. Juan Carlos Castañeda Fuentes & Juan Carlos Catalán Herrera, 2008. "Emigrant Remittances and the Real Exchange rate in Guatemala: an Adjustment-Costs Story," Money Affairs, CEMLA, vol. 0(1), pages 31-71, January-J.
    8. Carmen Broto & Javier Díaz-Cassou & Aitor Erce-Domínguez, 2008. "Measuring and explaining the volatility of capital flows towards emerging countries," Working Papers 0817, Banco de España.
    9. Aitor Erce, 2012. "Does the IMF's official support affect sovereign bonds maturities?," Globalization Institute Working Papers 128, Federal Reserve Bank of Dallas.
    10. Swamy, Vighneswara, 2013. "Euro Zone Debt Crisis: Implications for Indian Banking Sector," MPRA Paper 47658, University Library of Munich, Germany.

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    More about this item

    Keywords

    sovereign debt; financial markets; global liquidity; structural analysis;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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