The External Financing of Emerging Market Countries: Evidence from Two Waves of Financial Globalization

By Aleksandar Zaklan, Paolo Mauro, Martín Minnoni, Andre Faria

September 1, 2006

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Aleksandar Zaklan, Paolo Mauro, Martín Minnoni, and Andre Faria. The External Financing of Emerging Market Countries: Evidence from Two Waves of Financial Globalization, (USA: International Monetary Fund, 2006) accessed November 21, 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

We trace the history of where and why investors from the most advanced countries directed funds, ultimately helping finance economic development in emerging market countries. To do this, we analyze the determinants of international investors' willingness to hold the external liabilities issued by emerging market countries, through cross-country regressions for both prices (bond spreads) and quantities (bond market capitalization or stocks of external liabilities) estimated at various points during two waves of financial globalization (1870-1913 and the present time). The data are drawn from primary sources for the historical period, and the much-expanded, new vintage of the Lane and Milesi-Ferretti (2006) data set for the modern period. The results suggest that, throughout the past one and a half centuries, a combination of human capital (including informal human capital) and institutional quality has been a key determinant of emerging market countries' ability to attract international investors.

Subject: Bond yields, Emerging and frontier financial markets, Population and demographics, Stocks, Yield curve

Keywords: Aggregate debt number, Natural resources, Population ratio, Portfolio debt, Sovereign bond, WP

Publication Details

Pages:

49
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/205
Stock No:

WPIEA2006205
ISBN:

9781451864656
ISSN:

1018-5941

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