Emerging Market Local Currency Bond Yields and Foreign Holdings in the Post-Lehman Period - a Fortune or Misfortune?
IMF Working Papers, February 12, 2014
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- Emerging Market Local Currency Bond Yields and Foreign Holdings in the Post-Lehman Period - a Fortune or Misfortune?
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Bibliographic details
- Authors: Christian H Ebeke, Miss Yinqiu Lu
- Published: February 12, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484302859.001
Main findings
- Foreign holdings of local currency government bonds in emerging market countries (EMs) have reduced bond yields in the post-Lehman period.
- Foreign holdings have somewhat increased yield volatility in the post-Lehman period.
- 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.
Methodology and identification
- Econometric analyses conducted on a sample of 12 EMs demonstrate that the results are robust and causal.
- Identification strategy: a geography-based measure of EMs financial remoteness vis-à-vis major offshore financial centers is used as an instrumental variable for the foreign holdings variable.
Scope, subjects, and keywords
- Sample: 12 EMs
- Case study: Poland
- Subjects: Bond yields, Currencies, Financial institutions, Financial markets, Financial services, Money, Securities markets, Sovereign bonds, Yield curve
- Keywords: Bond yields; Currencies; Domestic Bonds; endogeneity issue; foreign holding; Foreign Holdings; Global; government bond; government bond bond yield; inflation rate; Poland yield regression; Securities markets; Sovereign bonds; Volatility; WP; Yield curve; yield volatility; Yields