IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

New Strategies for Emerging Domestic Sovereign Bond Markets

  • Hans J. Blommestein
  • Javier Santiso

The forces shaping the revolution in banking and capital markets have radically changed the financial landscape during the past three decades. A remarkable feature of this changing new landscape has been the astonishing rate of internationalisation of the financial system in the last two decades, with emerging markets becoming increasingly important participants. At times, this participation led to an excessive reliance on foreign financing, making the participation of these countries in the global financial system more vulnerable to shifts in expectations and perceptions. The sovereign debt management strategy suffered from many structural weaknesses, failing to take into account international best practices in financing budget deficits and developing domestic government securities markets. Consequently, emerging markets experienced serious financial crisis episodes. Against this background, the paper focuses on new and more sophisticated strategies to develop domestic bond markets, taking into account the risk profile, complexities and other constraints of emerging markets. The paper’s central thesis is that risk-based public debt management and liquid domestic bond markets are important, mutually reinforcing strategies for emerging financial markets to attain: i) enhanced financial stability, and ii) a more successful participation in the global financial landscape. It will also be shown that this twin-strategies approach requires taking a macroeconomic policy perspective. Le paysage des marchés de capitaux internationaux a changé de manière drastique au cours de ces dernières années. Un levier particulièrement puissant de ces changements a été celui de l’internationalisation des marchés financiers au cours des deux dernières décennies, les marchés émergents acquérant en particulier un nouveau protagonisme. Cette réémergence s’est, dans le passé récent, accompagnée de crises et de turbulences, la dépendance à l’égard des flux de portefeuille étrangers s’accompagnant d’une vulnérabilité accrue de la part des économies émergentes, tributaires des changements d’anticipations et de perceptions prévalant sur les marchés internationaux. La stratégie de la gestion de la dette d’État a ainsi pâtit de nombreuses défaillances, se trouvant notamment incapable de prendre la pleine mesure des meilleures pratiques internationales en matière de financement budgétaire et de développement de marchés de capitaux locaux solides. En conséquence les marchés émergents ont aligné les épisodes de crises financières. Le papier ici présenté met en perspective les évolutions les plus récentes et avec elles la profonde transformation en cours des marchés de capitaux émergents. Il souligne en particulier l’apparition de nouvelles stratégies de gestion des risques liés aux dettes émergentes, des stratégies plus sophistiquées prenant davantage en compte le profil des risques sous-jacents, ainsi que les nouvelles complexités et contraintes dominant les marchés émergents. La thèse centrale du papier est que la combinaison des gestions actives des risques de dette publique et la prise en compte des liquidités affluant vers les marchés de dettes domestiques sont des stratégies qui se renforcent mutuellement pour : i) atteindre une plus grande stabilité financière ; ii) optimiser l’intégration de ces économies dans le système financier international.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by OECD Publishing in its series OECD Development Centre Working Papers with number 260.

in new window

Date of creation: Apr 2007
Date of revision:
Handle: RePEc:oec:devaaa:260-en
Contact details of provider: Postal:
2 rue Andre Pascal, 75775 Paris Cedex 16

Phone: 33-(0)-1-45 24 82 00
Fax: 33-(0)-1-45 24 85 00
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Kraay, Aart & Loayza, Norman & Servén, Luis & Ventura, Jaume, 2001. "Country Portfolios," CEPR Discussion Papers 2974, C.E.P.R. Discussion Papers.
  2. Giavazzi, Francesco & Missale, Alessandro, 2004. "Public Debt Management in Brazil," CEPR Discussion Papers 4293, C.E.P.R. Discussion Papers.
  3. Raddatz, Claudio, 2006. "Liquidity needs and vulnerability to financial underdevelopment," Journal of Financial Economics, Elsevier, vol. 80(3), pages 677-722, June.
  4. Eijffinger, S.C.W. & Goderis, B.V.G., 2007. "Currency crises, monetary policy and corporate balance sheet vulnerabilities," Other publications TiSEM efb2b284-5150-4ad4-aa63-c, Tilburg University, School of Economics and Management.
  5. Reinhart, Carmen, 2004. "Debt intolerance: Executive summary," MPRA Paper 13398, University Library of Munich, Germany.
  6. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "Serial Default and the "Paradox" of Rich-to-Poor Capital Flows," American Economic Review, American Economic Association, vol. 94(2), pages 53-58, May.
  7. Gerardo della Paolera & Alan M. Taylor, 2012. "Sovereign Debt in Latin America, 1820-1913," NBER Working Papers 18363, National Bureau of Economic Research, Inc.
  8. Steven B. Kamin, 1999. "The current international financial crisis: how much is new?," International Finance Discussion Papers 636, Board of Governors of the Federal Reserve System (U.S.).
  9. Paolo Mauro & Yishay Yafeh & Nathan Sussman, 2001. "Emerging Market Spreads: Then Versus Now," OFRC Working Papers Series 2001fe03, Oxford Financial Research Centre.
  10. Blommestein, Hans J., 2000. "The new global financial landscape under stress," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 2224, March.
  11. Guillermo A. Calvo & Ernesto Talvi, 2005. "Sudden Stop, Financial Factors and Economic Collpase in Latin America: Learning from Argentina and Chile," NBER Working Papers 11153, National Bureau of Economic Research, Inc.
  12. Moritz Schularick, 2006. "A tale of two 'globalizations': capital flows from rich to poor in two eras of global finance," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(4), pages 339-354.
  13. Arturo C. Porzecanski, 2005. "From Rogue Creditors to Rogue Debtors: Implications of Argentina's Default," International Finance 0510010, EconWPA.
  14. Barry Eichengreen & Michael D. Bordo, 2003. "Crises now and then: what lessons from the last era of financial globalization?," Chapters, in: Monetary History, Exchange Rates and Financial Markets, chapter 3 Edward Elgar Publishing.
  15. Cuadro-Sáez, Lucía & Fratzscher, Marcel & Thimann, Christian, 2009. "The transmission of emerging market shocks to global equity markets," Journal of Empirical Finance, Elsevier, vol. 16(1), pages 2-17, January.
  16. Roberto Rigobon & Marcio Garcia, 2004. "A Risk Management Approach to Emerging Market’s Sovereign Debt Sustainability with an application to Brazilian data," Econometric Society 2004 Latin American Meetings 24, Econometric Society.
  17. Goderis, B.V.G., 2005. "Financial crises and monetary policy," Other publications TiSEM 8bc37050-0dfe-4a86-bf1e-1, Tilburg University, School of Economics and Management.
  18. Santiso, Javier, 2008. "The Emergence of Latin Multinationals," MPRA Paper 12904, University Library of Munich, Germany.
  19. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2003. "Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters," NBER Working Papers 10036, National Bureau of Economic Research, Inc.
  20. Serge Jeanneau & Camilo E Tovar, 2006. "Domestic bond markets in Latin America: achievements and challenges," BIS Quarterly Review, Bank for International Settlements, June.
  21. Sebastián Nieto Parra & Javier Santiso, 2007. "The Usual Suspects: A Primer on Investment Banks' Recommendations and Emerging Markets," OECD Development Centre Working Papers 258, OECD Publishing.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:oec:devaaa:260-en. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.