Government Bonds in Domestic and Foreign Currency: The Role of Macroeconomic and Institutional Factors

43 Pages Posted: 10 Apr 2003

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

Daniela Klingebiel

World Bank - Policy Unit

Sergio L. Schmukler

World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2003

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. This Paper studies determinants of the size and currency composition of government bond markets for a panel of developed and developing countries. We 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.

Keywords: Government debt, government bond markets, sovereign bonds, foreign currency debt, currency structure

JEL Classification: F21, F33, F34, F36, G15, G18

Suggested Citation

Claessens, Stijn and Klingebiel, Daniela and Schmukler, Sergio, Government Bonds in Domestic and Foreign Currency: The Role of Macroeconomic and Institutional Factors (February 2003). CEPR Discussion Paper No. 3789. Available at SSRN: https://ssrn.com/abstract=394604

Stijn Claessens (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Daniela Klingebiel

World Bank - Policy Unit ( email )

1818 H Street NW
Room MC 9-903
Washington, DC 20433
United States
202-473-7470 (Phone)
202-522-2031 (Fax)

Sergio Schmukler

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN MC 3-301
Washington, DC 20433
United States
202-458-4167 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://www.worldbank.org/en/about/people/s/sergio-schmukler

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