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Local Currency Bond Markets

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  • John D. Burger
  • Francis E. Warnock

Abstract

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.

Suggested Citation

  • John D. Burger & Francis E. Warnock, 2006. "Local Currency Bond Markets," NBER Working Papers 12552, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:12552
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    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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