Do Bond Markets Reward Transparency?

Posted: 17 Feb 2005

See all articles by Rachel Glennerster

Rachel Glennerster

Massachusetts Institute of Technology (MIT) - Department of Economics

Yongseok Shin

Washington University in St. Louis - Department of Economics; National Bureau of Economic Research (NBER); Federal Reserve Banks - Federal Reserve Bank of St. Louis

Date Written: January 2005

Abstract

This paper studies whether transparency (measured by accuracy and frequency of macroeconomic information released to the public) leads to lower borrowing costs in sovereign bond markets. We analyze the data generated during the 1999-2002 period, when the IMF instituted three new ways for countries to increase their transparency. The procedure governing the actual implementation of the reforms enables us to control for endogeneity bias. We find that countries experience a substantial decline in borrowing costs when they choose to become more transparent. The magnitude of the decline is inversely related to the initial level of transparency and the size of the debt market. Finally, we use evidence from high-frequency data to corroborate the finding that the reforms indeed led to better-informed markets.

Suggested Citation

Glennerster, Rachel and Shin, Yongseok, Do Bond Markets Reward Transparency? (January 2005). Available at SSRN: https://ssrn.com/abstract=668202

Rachel Glennerster (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Cambridge, MA 02139
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Yongseok Shin

Washington University in St. Louis - Department of Economics ( email )

One Brookings Drive
St. Louis, MO 63130
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National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

P.O. Box 442
St. Louis, MO 63166-0442
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