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

  • Claessens, Stijn
  • Klingebiel, Daniela
  • Schmukler, Sergio

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.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2986.

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Date of creation: 31 Mar 2003
Date of revision:
Handle: RePEc:wbk:wbrwps:2986
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  1. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
  2. Sebastian Edwards, 1985. "The Pricing of Bonds and Bank Loans in International Markets: An Empirical Analysis of Developing Countries' Foreign Borrowing," NBER Working Papers 1689, National Bureau of Economic Research, Inc.
  3. Claessens, Stijn & Klingebiel, Daniela & Schmukler, Sergio, 2002. "Explaining the Migration of Stocks from Exchanges in Emerging Economies to International Centres," CEPR Discussion Papers 3301, C.E.P.R. Discussion Papers.
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