Do Financial Markets Value Quality of Fiscal Governance?

By Kady Keita, Gene L. Leon, Frederico Lima

October 11, 2019

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Format: Chicago

Kady Keita, Gene L. Leon, and Frederico Lima. Do Financial Markets Value Quality of Fiscal Governance?, (USA: International Monetary Fund, 2019) accessed September 18, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We examine the link between the quality of fiscal governance and access to market-based external finance. Stronger fiscal governance is associated with improvements in several indicators of market access, including a higher likelihood of issuing sovereign bonds and having a sovereign credit rating, receiving stronger ratings, and obtaining lower spreads. Using the more granular information on quality of fiscal governance from Public Expenditure and Financial Accountability (PEFA) assessments for 89 emerging and developing economies, we find that similar indicators of market access are correlated with sound public financial management practices, especially those that improve budget transparency and reporting, debt management, and fiscal strategy.

Subject: Credit ratings, Financial institutions, Financial services, Fiscal governance, Fiscal policy, Money, Public Expenditure and Financial Accountability (PEFA), Public financial management (PFM), Sovereign bonds, Yield curve

Keywords: Access indicator, Credit rating, Credit ratings, Fiscal governance, Global, Market, Market access, PEFA assessment, PEFA score, Public Expenditure and Financial Accountability (PEFA), Public financial management, Sovereign bond, Sovereign bond issuance, Sovereign bonds, Sub-Saharan Africa, WP, Yield curve

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/218
Stock No:

WPIEA2019218
ISBN:

9781513516127
ISSN:

1018-5941

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