Bond Markets in Africa
IMF Working Papers, January 14, 2013
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- Bond Markets in Africa
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Bibliographic details
- Authors: Yibin Mu, Peter Phelps, Janet Gale Stotsky
- Published: January 14, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475527148.001
Summary
- African bond markets have been steadily growing in recent years, but nonetheless remain undeveloped.
- African countries would benefit from greater access to financing and deeper financial markets.
- This paper compiles a unique set of data on corporate bond markets in Africa and applies an econometric model to analyze the key determinants of African government securities market and corporate bond market capitalization.
- Policy implications follow.
Key findings
- Government securities market capitalization:
- Is directly related to better institutions and interest rate volatility.
- Is inversely related to the fiscal balance, higher interest rate spreads, exchange rate volatility, and current and capital account openness.
- Corporate bond market capitalization:
- Is directly linked to economic size, the level of development of the economy and financial markets, better institutions, and interest rate volatility.
- Is inversely related to higher interest rate spreads and current account openness.
Determinants analyzed (econometric model)
- Variables highlighted as positively associated:
- Better institutions
- Interest rate volatility
- Economic size (for corporate bond market capitalization)
- Level of development of the economy and financial markets (for corporate bond market capitalization)
- Variables highlighted as negatively associated:
- Fiscal balance (for government securities market capitalization)
- Higher interest rate spreads
- Exchange rate volatility (for government securities market capitalization)
- Current account openness (for both markets)
- Capital account openness (for government securities market capitalization)
Policy implications
- The paper derives policy implications from the econometric analysis aimed at deepening bond markets and improving access to financing in African countries.
- (Policy implications follow in the full paper.)