Fiscal Transparency, Borrowing Costs, and Foreign Holdings of Sovereign Debt
IMF Working Papers, August 24, 2018
Source details
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- Fiscal Transparency, Borrowing Costs, and Foreign Holdings of Sovereign Debt
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Bibliographic details
- Authors: Laurent Kemoe, Zaijin Zhan
- Published: August 24, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484373835.001
Summary and scope
- Paper explores effects of fiscal transparency on borrowing costs and on foreign demand for sovereign debt for 33 emerging and developing economies (EMs).
- Measures separate effects of three dimensions of fiscal transparency:
- openness of the budget process,
- fiscal data transparency,
- accountability of fiscal actors.
- Uses multiple indicators, including a constructed indicator based on published data in the IMF’s Government Finance Statistics Yearbook.
Methodology and data indicators
- Sample: 33 emerging and developing economies (EMs).
- Indicators used:
- multiple fiscal transparency indicators,
- a constructed indicator based on data published in the IMF’s Government Finance Statistics Yearbook.
- Outcome variables assessed:
- sovereign interest rate spreads (EMBI yield spread implied by keywords),
- foreign holdings of sovereign debt.
Key findings
- Higher fiscal transparency is associated with:
- reductions in sovereign interest rate spreads,
- increases in foreign holdings of sovereign debt.
- Each dimension of fiscal transparency plays a different role in influencing borrowing costs and foreign demand.
- Availability of detailed cross-country comparable fiscal data, especially for balance sheet items, increases foreign investors’ willingness to hold EM sovereign debt.
Subject areas and keywords (as listed)
- Subjects: Budget planning and preparation; Economic and financial statistics; Emerging and frontier financial markets; Financial markets; Fiscal transparency; Government finance statistics; Public debt; Public financial management (PFM).
- Keywords: Borrowing costs; Budget planning and preparation; debt sustainability issue; EM debt; EMBI index; EMBI yield spread; Emerging and frontier financial markets; Emerging market economies; financial risk; Fiscal transparency; Global; Government finance statistics; influence investors decision making; interest rate; investor inflow; investors holding; risk appetite; WP.
Content in this bundle
- Fiscal Transparency, Borrowing Costs, and Foreign Holdings of Sovereign Debt, WP/18/189, August 2018