New Strategies for Emerging Domestic Sovereign Bond Markets in the Global Financial Landscape

Global Economy Journal, Vol. 7, No. 2, 2007

58 Pages Posted: 11 Nov 2008 Last revised: 23 Sep 2009

See all articles by Hans J. Blommestein

Hans J. Blommestein

Vivid Economics; Organization for Economic Co-Operation and Development (OECD); Tilburg University - Tilburg University School of Economics and Management

Javier Santiso

ESADE Business School

Date Written: April 10, 2007

Abstract

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 internationalization 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.

Keywords: emerging bond markets, global finance, risk management

JEL Classification: G15, G32, N26

Suggested Citation

Blommestein, Hans J. and Santiso, Javier, New Strategies for Emerging Domestic Sovereign Bond Markets in the Global Financial Landscape (April 10, 2007). Global Economy Journal, Vol. 7, No. 2, 2007, Available at SSRN: https://ssrn.com/abstract=1298963

Hans J. Blommestein

Vivid Economics

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Organization for Economic Co-Operation and Development (OECD) ( email )

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Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
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Netherlands

Javier Santiso (Contact Author)

ESADE Business School ( email )

Mateo Inurria 27
Madrid, 28036
Spain

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