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Local Currency Bond Markets Law Reform: A Methodology for Emerging Markets and Developing Economies

Author: Wouter Bossu

Publisher: INTERNATIONAL MONETARY FUND

Published: 2020-11-20

Total Pages: 61

ISBN-13: 9781513561608

Recent financial crises including the ongoing one caused by the COVID-19 pandemic have consistently drawn attention to the need to strengthen the quality of public debt management in emerging markets and developing countries. Deeper and more efficient domestic government debt markets—being, a key segment of the LCBM for many emerging markets and developing economies—play a key role in reducing financial vulnerability to shocks and enable governments to finance critical economic and fiscal policy measures in response to them. Policymakers and international organizations have long recognized that developing and strengthening LCBMs is a key policy prescription to sound public debt management. Robust legal and regulatory frameworks are recognized as being critical building blocks for the structure, development and functioning of LCBMs. This Working Paper seeks to outline a strategically anchored methodology that can be applied to design, build and implement the legal and tax foundations for the development of LCBMs that would adequately address common challenges and impediments.

Foreign Participation in Emerging Markets’ Local Currency Bond Markets

Author: Mr.Shanaka J. Peiris

Publisher: International Monetary Fund

Published: 2010-04-01

Total Pages: 21

ISBN-13: 1451982607

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This paper estimates the impact of foreign participation in determining long-term local currency government bond yields and volatility in a group of emerging markets from 2000-2009. The results of a panel data analysis of 10 emerging markets show that greater foreign participation in the domestic government bond market tends to significantly reduce long-term government yields. Moreover, greater foreign participation does not necessarily result in increased volatility in bond yields in emerging markets and, in fact, could even dampen volatility in some instances.

Emerging Market Local Currency Bond Yields and Foreign Holdings in the Post-Lehman Period - a Fortune or Misfortune?

Author: Mr.Christian Ebeke

Publisher: International Monetary Fund

Published: 2014-02-12

Total Pages: 38

ISBN-13: 1475559283

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The paper shows that foreign holdings of local currency government bonds in emerging market countries (EMs) have reduced bond yields but have somewhat increased yield volatility in the post-Lehman period. Econometric analyses conducted from a sample of 12 EMs demonstrate that these results are robust and causal. We use an identification strategy exploiting the geography-based measure of EMs financial remoteness vis-à-vis major offshore financial centers as an instrumental variable for the foreign holdings variable.The results also show that, in countries with weak fiscal and external positions, foreign holdings are greatly associated with increased yield volatility. A case study using Poland data elaborates on the cross country findings.

Local Currency Bond Markets - A Diagnostic Framework

Author: World Bank

Publisher: International Monetary Fund

Published: 2013-07-09

Total Pages: 40

ISBN-13: 1498341527

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In November 2011, the G-20 endorsed an action plan to support the development of local currency bond markets (LCBM). International institutions—the IMF, the World Bank, the EBRD, and the OECD—were asked to draw on their experience to develop a diagnostic framework (DF) to identify general preconditions, key components, and constraints for successful LCBM development. The objective is to provide a tool for analyzing the state of development and efficiency of local currency bond markets. The application of the DF is expected to be flexible, bearing in mind that the potential for LCBM development depends on economic size, financing needs, and stage of economic development.

Guidance Note For Developing Government Local Currency Bond Markets

Author: International Monetary Fund

Publisher: International Monetary Fund

Published: 2021-03-12

Total Pages: 157

ISBN-13: 1513573926

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This guidance note was prepared by International Monetary Fund (IMF) and World Bank Group staff under a project undertaken with the support of grants from the Financial Sector Reform and Strengthening Initiative, (FIRST).The aim of the project was to deliver a report that provides emerging market and developing economies with guidance and a roadmap in developing their local currency bond markets (LCBMs). This note will also inform technical assistance missions in advising authorities on the formulation of policies to deepen LCBMs.

The Development of Local Capital Markets

Author: Mr.Luc Laeven

Publisher: International Monetary Fund

Published: 2014-12-19

Total Pages: 25

ISBN-13: 1498372201

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Capital markets can improve risk sharing and the efficiency with which capital is allocated to the real economy, boosting economic growth and welfare. However, despite these potential benefits, not all countries have well developed capital markets. Moreover, government-led initiatives to develop local capital markets have had mixed success. This paper reviews the literature on the benefits and costs of developing local capital markets, and describes the challenges faced in the development of such markets. The paper concludes with a set of policy recommendations emerging from this literature.

Emerging Capital Markets and Globalization

Author: Augusto de la Torre

Publisher: World Bank Publications

Published: 2006-10-20

Total Pages: 232

ISBN-13: 0821365444

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Back in the early 1990s, economists and policy makers had high expectations about the prospects for domestic capital market development in emerging economies, particularly in Latin America. Unfortunately, they are now faced with disheartening results. Stock and bond markets remain illiquid and segmented. Debt is concentrated at the short end of the maturity spectrum and denominated in foreign currency, exposing countries to maturity and currency risk. Capital markets in Latin America look particularly underdeveloped when considering the many efforts undertaken to improve the macroeconomic environment and to reform the institutions believed to foster capital market development. The disappointing performance has made conventional policy recommendations questionable, at best. 'Emerging Capital Markets and Globalization' analyzes where we stand and where we are heading on capital market development. First, it takes stock of the state and evolution of Latin American capital markets and related reforms over time and relative to other countries. Second, it analyzes the factors related to the development of capital markets, with particular interest on measuring the impact of reforms. And third, in light of this analysis, it discusses the prospects for capital market development in Latin America and emerging economies and the implications for the reform agenda.

Emerging Local Currency Bond Markets

Author: John D. Burger

Publisher:

Published: 2010

Total Pages:

ISBN-13:

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We assess the development of local currency bond markets in emerging market economies (EMEs). Supported by policies and laws that helped to improve macroeconomic stability and creditor rights, many local currency EME bond markets have grown substantially over the past decade and have also provided USD-based investors with attractive returns. U.S. investors have responded by increasing their holdings of EME local currency bonds from less than $2 billion in 2001 to over $27 billion by end-2008. While the increase in U.S. investment spanned many EMEs, empirical tests suggest that relatively more went to those with identifiable investor-friendly institutions and policies.

Global Financial Stability Report, April 2012

Author: International Monetary Fund. Monetary and Capital Markets Department

Publisher: International Monetary Fund

Published: 2012-04-18

Total Pages: 94

ISBN-13: 1616352477

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The April 2012 Global Financial Stability Report assesses changes in risks to financial stability over the past six months, focusing on sovereign vulnerabilities, risks stemming from private sector deleveraging, and assessing the continued resilience of emerging markets. The report probes the implications of recent reforms in the financial system for market perception of safe assets, and investigates the growing public and private costs of increased longevity risk from aging populations.

Global Waves of Debt

Author: M. Ayhan Kose

Publisher: World Bank Publications

Published: 2021-03-03

Total Pages: 403

ISBN-13: 1464815453

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The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.