Good-Bye Original Sin, Hello Risk On-Off, Financial Fragility, and Crises?

37 Pages Posted: 28 Apr 2020 Last revised: 10 May 2021

See all articles by Joshua Aizenman

Joshua Aizenman

University of Southern California - Department of Economics; National Bureau of Economic Research (NBER)

Yothin Jinjarak

Victoria University of Wellington - School of Economics & Finance

Donghyun Park

Asian Development Bank - Economic Research

Huanhuan Zheng

National University of Singapore

Date Written: April 2020

Abstract

We analyze the sovereign bond issuance data of eight major emerging markets (EMs) - Brazil, China, India, Indonesia, Mexico, Russia, South Africa and Turkey from 1970 to 2018. Our analysis suggests that (i) EM local currency bonds tend to be smaller in size, shorter in maturity, or lower in coupon rate than foreign currency bonds; (ii) EMs are more likely to issue local-currency sovereign bonds if their currencies appreciated before the global financial crisis of 2008 (GFC); (iii) inflation-targeting monetary policy increases the likelihood of issuing local-currency debt before GFC but not after; and (iv) EMs that offer higher sovereign yields are more likely to issue local-currency bonds after GFC. Future data will allow us to test and identify structural changes associated with the COVID-19 pandemic and its aftermath.

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Suggested Citation

Aizenman, Joshua and Jinjarak, Yothin and Park, Donghyun and Zheng, Huanhuan, Good-Bye Original Sin, Hello Risk On-Off, Financial Fragility, and Crises? (April 2020). NBER Working Paper No. w27030, Available at SSRN: https://ssrn.com/abstract=3586161

Joshua Aizenman (Contact Author)

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yothin Jinjarak

Victoria University of Wellington - School of Economics & Finance ( email )

P.O. Box 600
Wellington 6001
New Zealand

Donghyun Park

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Huanhuan Zheng

National University of Singapore ( email )

469C Bukit Timah Rd
NUHS Tower Block Level 7
Singapore, 259772
Singapore

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