Impact of Macroeconomic, Political, and Institutional Factors on the Structure of Government Debt in Emerging Market Countries

August 1, 2008

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Anastasia Guscina. Impact of Macroeconomic, Political, and Institutional Factors on the Structure of Government Debt in Emerging Market Countries, (USA: International Monetary Fund, 2008) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Debt crises that have shaken Latin America, Asia, and Russia have brought an increasing attention to the structure of debt in emerging market countries. Using the newly released Jeanne-Guscina EM Government Debt Database 2006 this paper empirically explores the role of macroeconomic, political, and institutional factors in determining the structure of government debt. Results show that unstable macroeconomic environment, poor quality institutions, and uncertain political climate hinder the development of domestic debt market. Moreover, such instability shifts the debt structure away from long-term local currency fixed rate debt towards short-term debt or to debt indexed to foreign currency, short-term interest rates or inflation. Original sin seems to be on the way out, as more and more countries are issuing local currency debt at longer maturities-which can be explained by successful macroeconomic stabilization policies and lessons learned from the debt crises.

Subject: Currencies, Domestic debt, Foreign currency debt, Public debt, Securities markets

Keywords: Debt market, Debt share, DLTF debt, Foreign currency, Government debt, Interest rate, WP

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/205
Stock No:

WPIEA2008205
ISBN:

9781451870633
ISSN:

1018-5941

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