Local Currency Bond Markets

Burger, John D.; Warnock, Francis E.

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Local Currency Bond Markets

NBER Working Paper No. w12552

22 Pages Posted: 19 Oct 2006 Last revised: 26 Oct 2022

See all articles by John D. Burger

John D. Burger

Loyola University Maryland - Department of Economics

Francis E. Warnock

University of Virginia - Darden Business School; National Bureau of Economic Research (NBER)

There are 2 versions of this paper

Date Written: October 2006

Abstract

We analyze the development of 49 local bond markets. Our main finding is that policies and laws matter: Countries with stable inflation rates and strong creditor rights have more developed local bond markets and rely less on foreign-currency-denominated bonds. The results suggest that "original sin" is a misnomer. Emerging economies are not inherently dependent upon foreign-currency debt. Rather, by improving policy performance and strengthening institutions they may develop local currency bond markets, reduce their currency mismatch, and lessen the likelihood of future crises.

Suggested Citation: Suggested Citation

Burger, John D. and Warnock, Francis E., Local Currency Bond Markets (October 2006). NBER Working Paper No. w12552, Available at SSRN: https://ssrn.com/abstract=933597