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Government bonds in domestic and foreign currency: the role of macroeconomic and institutional factors

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  • Claessens,Stijn
  • Klingebiel,Daniela M. H.
  • Schmukler,Sergio L.

Abstract

The development of government bond markets and, in particular, their currency composition have recently received much interest, partly because of their relation with financial crises. The authors study the determinants of the size and currency composition of government bond markets for a panel of industrial and developing countries. They find that countries with larger economies, greater domestic investor bases, and more flexible exchange rate regimes have larger domestic currency bond markets, while smaller economies rely more on foreign currency bonds. Better institutional frameworks and macroeconomic fundamentals enhance both domestic currency bond markets and increase countries'ability to issue foreign currency bonds, while they raise the share of foreign exchange bonds.

Suggested Citation

  • Claessens,Stijn & Klingebiel,Daniela M. H. & Schmukler,Sergio L., 2003. "Government bonds in domestic and foreign currency: the role of macroeconomic and institutional factors," Policy Research Working Paper Series 2986, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2986
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    More about this item

    Keywords

    Banks&Banking Reform; Public Sector Economics; International Terrorism&Counterterrorism; Macroeconomic Management; Payment Systems&Infrastructure; Economic Theory&Research; Environmental Economics&Policies;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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