Who Holds Sovereign Debt and Why It Matters
64 Pages Posted: 1 Jun 2022
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Who Holds Sovereign Debt and Why It Matters
Who Holds Sovereign Debt and Why it Matters
Who Holds Sovereign Debt and Why it Matters
Date Written: May 18, 2022
Abstract
This paper studies the impact of investor composition on the sovereign debt market. We construct an aggregate data set of sovereign debt holdings by foreign and domestic bank, non-bank private, and official investors for 95 countries over twenty years. We find that private non-bank investors absorb most of the increase in sovereign debt supply. We further find that foreign non-bank investor demand is most responsive to the yield for emerging market (EM) debt, while yield elasticity for all investors is much lower for advanced economy debt. We show that EM sovereigns are highly vulnerable to losing their foreign non-bank investors.
Keywords: Sovereign debt, Banks and Non-banks, Advanced Economies and Emerging Markets
JEL Classification: F34, G11, G15, F41
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