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Local Currency Bond Markets

Listed author(s):
  • John D. Burger
  • Francis E. Warnock

We analyze the development of 49 local bond markets. Our 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 foreign-currency-denominated bonds. The results suggest that "original sin" is a misnomer. Emerging economies are not inherently dependent upon 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.

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File URL: http://www.nber.org/papers/w12552.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12552.

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Date of creation: Oct 2006
Publication status: published as Burger, John D., and Francis E. Warnock, 2006. "Local Currency Bond Markets," IMF Staff Papers 53 (Special Issue): 115-132.
Handle: RePEc:nbr:nberwo:12552
Note: IFM
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  1. Claessens, Stijn & Klingebiel, Daniela & Schmukler, Sergio, 2003. "Government Bonds in Domestic and Foreign Currency: The Role of Macroeconomic and Institutional Factors," CEPR Discussion Papers 3789, C.E.P.R. Discussion Papers.
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  8. Cukierman, A. & Miller, G.P. & Neyapti, B., 2000. "Central Bank Rerform, Liberalization and Inflation in Transition Economies - an International Perspective," Papers 00-19, Tel Aviv.
  9. Philippe Aghion & Philippe Bacchetta & Abhijit Banerjee, 2001. "A Corporate Balance-Sheet Approach to Currency Crises," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 01.14, Université de Lausanne, Faculté des HEC, DEEP.
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  13. Morris Goldstein & Philip Turner, 2004. "Controlling Currency Mismatches in Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 373, January.
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