## Tracking Global Demand for Advanced Economy Sovereign Debt

_IMF Working Papers, December 3, 2012_

## Source details

**Canonical URL:** [Tracking Global Demand for Advanced Economy Sovereign Debt](https://www.imf.org/en/publications/wp/issues/2016/12/31/tracking-global-demand-for-advanced-economy-sovereign-debt-40135)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/tracking-global-demand-for-advanced-economy-sovereign-debt-40135/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/tracking-global-demand-for-advanced-economy-sovereign-debt-40135/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/tracking-global-demand-for-advanced-economy-sovereign-debt-40135/bundle-manifest.json)

## Bibliographic details
- Authors: Serkan Arslanalp, Takahiro Tsuda
- Published: December 3, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475596403.001

---

### Summary
- Recent events demonstrate sovereigns, like banks, can be subject to runs, underscoring the importance of the investor base for sovereign liabilities.
- The paper proposes a methodology for compiling internationally comparable estimates of investor holdings of sovereign debt.
- Based on this methodology, the paper introduces a dataset for 24 major advanced economies covering US$42 trillion of sovereign debt holdings on a quarterly basis over 2004-11.
- The paper proposes a framework—sovereign funding shock scenarios (FSS)—for forward-looking analysis of sovereign vulnerability to sudden investor outflows, to be used alongside standard debt sustainability analyses (DSA).
- Two risk indices are introduced to assess vulnerability to shifts in investor behavior: investor base risk index (IRI) and foreign investor position index (FIPI).

### Dataset and methodology
- Coverage: 24 major advanced economies.
- Scope: Tracks US$42 trillion of sovereign debt holdings.
- Frequency and period: Quarterly data over 2004-11.
- Purpose: Produce internationally comparable estimates of investor holdings of sovereign debt to inform analysis of funding risk and investor behavior.

### Key findings
- Despite high-profile outflows from euro periphery countries, most sovereign borrowers increased reliance on foreign investors.
- Increased reliance on foreign investors may have helped reduce borrowing costs but can imply higher refinancing risks going forward.
- Advanced economy banks’ exposure to their own government debt began to increase across the board after the global financial crisis, strengthening sovereign-bank linkages.

### Risks, indices, and analytical tools
- Sovereign funding shock scenarios (FSS): A proposed framework to conduct forward-looking analysis of sovereigns’ vulnerability to sudden investor outflows; intended for use in conjunction with DSAs.
- Investor base risk index (IRI): Introduced to assess sovereign vulnerability related to the investor base.
- Foreign investor position index (FIPI): Introduced to assess sovereign vulnerability related to foreign investor holdings.

### Implications and policy relevance
- Monitoring investor base composition and foreign investor positions is critical for assessing sovereign refinancing and rollover risks.
- Analyses of sovereign vulnerability should incorporate forward-looking funding shock scenarios (FSS) and the proposed risk indices (IRI and FIPI) alongside traditional DSA frameworks.

---

## Content in this bundle

- **PDP-Working Paper**
  - [PDP-Working Paper (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp12284.pdf.md){rel="alternate" type="text/markdown"}
  - [PDP-Working Paper (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp12284.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/tracking-global-demand-for-advanced-economy-sovereign-debt-40135_