Do Financial Markets Value Quality of Fiscal Governance?

30 Pages Posted: 8 Nov 2019

See all articles by Kady Keita

Kady Keita

Independent

Hyginus Leon

International Monetary Fund (IMF)

Frederico Lima

International Monetary Fund (IMF)

Date Written: October 2019

Abstract

We examine the link between the quality of fiscal governance and access to market-based external finance. Stronger fiscal governance is associated with improvements in several indicators of market access, including a higher likelihood of issuing sovereign bonds and having a sovereign credit rating, receiving stronger ratings, and obtaining lower spreads. Using the more granular information on quality of fiscal governance from Public Expenditure and Financial Accountability (PEFA) assessments for 89 emerging and developing economies, we find that similar indicators of market access are correlated with sound public financial management practices, especially those that improve budget transparency and reporting, debt management, and fiscal strategy.

Keywords: Access to international capital markets, International bond markets, Financial crises, Sovereign credit ratings, Access to capital markets, Fiscal governance, public financial management, sovereign bond, credit rating, WP, WGI, bond issuance, credit rate, international capital market

JEL Classification: F34, G15, H63, F16, E01, E62, E22, E52

Suggested Citation

Keita, Kady and Leon, Hyginus and Lima, Frederico, Do Financial Markets Value Quality of Fiscal Governance? (October 2019). IMF Working Paper No. 19/218, Available at SSRN: https://ssrn.com/abstract=3482302

Hyginus Leon

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6115 (Phone)
202-589-6115 (Fax)

Frederico Lima

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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