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Overcoming original sin: insights from a new dataset

Author

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  • Mert Onen
  • Hyun Song Shin
  • Goetz von Peter

Abstract

This paper introduces a new dataset on emerging market sovereign bonds, distinguishing between the currency of denomination and the residence of investors. Our dataset is on long-term government bonds and provides a more complete coverage of bonds issued in domestic markets. We document several salient trends. While a preponderance of foreign currency bonds is associated with greater holdings by foreign investors, the correlation is weak at best. Over time, emerging market governments have enhanced their ability to borrow abroad in their own currency, reducing their reliance on foreign currency debt. In this sense, EME sovereigns have made progress toward overcoming original sin. Nevertheless, the greater role of market and duration risk and the activity of foreign non-bank financial intermediaries (NBFIs) mean that emerging markets remain subject to fluctuations in global financial conditions.

Suggested Citation

  • Mert Onen & Hyun Song Shin & Goetz von Peter, 2023. "Overcoming original sin: insights from a new dataset," BIS Working Papers 1075, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1075
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    References listed on IDEAS

    as
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    Cited by:

    1. Lewis, Karen K. & Fang, Xiang & Hardy, Bryan, 2022. "Who Holds Sovereign Debt and Why It Matters," CEPR Discussion Papers 17338, C.E.P.R. Discussion Papers.
    2. Grieco Fabio & de La Guéronnière Henri & Marsilli Clément & Paul Quentin & Rivaud Sophie, 2023. "Financing the climate and ecological transition in emerging economies [Financer la transition climatique et écologique dans les économies émergentes]," Bulletin de la Banque de France, Banque de France, issue 245.
    3. Bryan Hardy & Goetz von Peter, 2023. "Global liquidity: a new phase?," BIS Quarterly Review, Bank for International Settlements, December.
    4. Carol Bertaut & Valentina Bruno & Hyun Song Shin, 2023. "Original sin redux: role of duration risk," BIS Working Papers 1109, Bank for International Settlements.
    5. Ablam Estel Apeti & Bao-We-Wal Bambe & Jean-Louis Combes & Eyah Denise Edoh, 2023. "Original Sin: Fiscal Rules and Government Debt in Foreign Currency in Developing Countries," Working Papers hal-04130477, HAL.
    6. Jieun Lee, 2023. "Dollar and government bond liquidity: evidence from Korea," BIS Working Papers 1145, Bank for International Settlements.
    7. Guilherme Suedekum, 2023. "Local Currency Sovereign Debt Markets, Global Financial Conditions and the Role of Foreign Investors," IHEID Working Papers 19-2023, Economics Section, The Graduate Institute of International Studies.

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    More about this item

    Keywords

    emerging market economies; sovereign bonds; international lending; international financial markets; foreign investors; original sin;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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