International Bonds

2019 ◽  
pp. 249-264
Author(s):  
Soutonnoma Ouedraogo ◽  
David Scofield ◽  
Garrett C. Smith
Keyword(s):  
Sovereign Debt ◽  
Credit Rating ◽  
Equity Capital ◽  
Access To Credit ◽  
Macroeconomic Risk ◽  
International Equity ◽  
Debt Market ◽  
International Investors ◽  
The Cost ◽  
Balance Trade

Given the size of the global sovereign debt market is nearly as large as the entire international equity market, a thorough understanding of this market is useful to academics and practitioners alike. Sovereign bond markets allow nations to balance trade and fiscal policy, but a well-functioning domestic bond market and access to international investors are more complex than merely issuing sovereign debt. A nation’s credit rating affects both its economy in terms of domestic market stability as well as the economic stability of trade partners. Default and the restructuring of sovereign debt can trigger economic crisis. Moreover, the so-called sovereign ceiling has a real economic impact on domestic firms and can substantially affect access to credit as well as the cost of both debt and equity capital. The chapter also discusses the role of integration, effects of global macroeconomic risk factors, and diversification benefits.

Fiscal transparency and the cost of sovereign debt

2016 ◽  
Vol 83 (1) ◽  
pp. 106-128 ◽  
Author(s):  
Francisco Bastida ◽  
María-Dolores Guillamón ◽  
Bernardino Benito
Keyword(s):  
Interest Rates ◽  
Public Management ◽  
Sovereign Debt ◽  
Credit Rating ◽  
Credit Ratings ◽  
Political Trust ◽  
Cost Of Debt ◽  
Budget Deficits ◽  
Fiscal Transparency ◽  
The Cost

This article analyses the factors that seem to play an important role in determining the cost of sovereign debt. Specifically, we evaluate to what extent transparency, the level of corruption, citizens’ trust in politicians and credit ratings affect interest rates. For that purpose, we create a transparency index matching the 2007 Organisation for Economic Co-operation and Development/World Bank Budgeting Database items with the Organisation for Economic Co-operation and Development Best Practices for Budget Transparency sections. We also check our assumptions with the International Budget Partnership’s Open Budget Index and with a non-linear transformation of our index. Furthermore, we use several control variables for a sample of 103 countries in the year 2008. Our results show that better fiscal transparency, political trust and credit ratings are connected with a lower cost of sovereign debt. Finally, as expected, higher corruption, budget deficits, current account deficits and unemployment make sovereign interest rates increase. Points for practitioners The key implications for professionals working in public management and administration are twofold. First, despite the criticism raised by credit ratings, it is clear that poorer ratings are connected with higher financing costs for governments. Therefore, governments should enhance those indicators that impact the credit rating of their sovereign debt. Second, governments should seek to be more transparent, since transparency reduces uncertainty about the degree of cheating, improves decision-making and therefore decreases the cost of debt. Transparency reduces information asymmetries between governments and financial markets, which, in turn, diminishes the spread requested by investors.

Sovereign Debt and Regime Type: Reconsidering the Democratic Advantage

2012 ◽  
Vol 66 (4) ◽  
pp. 709-738 ◽  
Author(s):  
Emily Beaulieu ◽  
Gary W. Cox ◽  
Sebastian Saiegh
Keyword(s):  
Political Institutions ◽  
Sovereign Debt ◽  
Credit Rating ◽  
Regime Type ◽  
Gdp Per Capita ◽  
Data Sets ◽  
Credit Access ◽  
Access To Credit ◽  
Per Capita ◽  
Democratic Advantage

AbstractThe literature exploiting historical data generally supports the democratic advantage thesis, which holds that democracies can sell more bonds on better terms than their authoritarian counterparts. However, studies of more recent—and extensive—data sets find that democracies have received no more favorable bond ratings from credit rating agencies than otherwise similar autocracies; and have been no less prone to default. These findings raise the question: where is the democratic advantage? Our answer is that previous assessments of the democratic advantage have typically (1) ignored the democratic advantage in credit access; (2) failed to account for selection effects; and (3) treated GDP per capita as an exogenous variable, ignoring the many arguments that suggest economic development is endogenous to political institutions. We develop an estimator of how regime type affects credit access and credit ratings analogous to the “reservation wage” model of labor supply and treat GDP per capita as an endogenous variable. Our findings indicate that the democratic advantage in the postwar era has two components: first, better access to credit (most autocracies cannot even enter the international bond markets); and second, better ratings, once propensity to enter the market is controlled and GDP per capita is endogenized.

The Economics and Law of Sovereign Debt and Default

2009 ◽  
Vol 47 (3) ◽  
pp. 651-698 ◽  
Author(s):  
Ugo Panizza ◽  
Federico Sturzenegger ◽  
Jeromin Zettelmeyer
Keyword(s):  
Capital Market ◽  
Sovereign Debt ◽  
Recent Literature ◽  
International Capital ◽  
International Capital Market ◽  
Legal Principles ◽  
Limited Support ◽  
Debt Market ◽  
Debt Crises ◽  
The Cost

This paper surveys the recent literature on sovereign debt and relates it to the evolution of the legal principles underlying the sovereign debt market and the experience of the most recent debt crises and defaults. It finds limited support for theories that explain the feasibility of sovereign debt based on either external sanctions or exclusion from the international capital market and more support for explanations that emphasize domestic costs of default. The paper concludes that there remains a case for establishing institutions that reduce the cost of default but the design of such institutions is not a trivial task.

Sovereign Debt and Human Rights

2018 ◽  
Keyword(s):  
Human Rights ◽  
Sovereign Debt ◽  
Structural Adjustment ◽  
Credit Rating ◽  
Full Range ◽  
Audit Committees ◽  
World Bank Group ◽  
Social Scientists ◽  
Export Credits ◽  
Bank Group

The first book to address the links between sovereign debt and human rights. Authors are renowned jurists, economics, historians and social scientists, all of which examine the links between debt and human rights from a variety of angles. The book is structured around five basic parts. The first sets out the historical, political and economic context of sovereign debt. Indeed, without understanding how debt accumulates, why it is necessary and to whom it is owed, it is impossible to fully comprehend the full range of arguments about its impact on human rights. The second part effectively addresses the human rights dimension of the three types of sovereign lenders, namely inter-governmental financial institutions (IFIs) (chiefly those from the World Bank group and those within the EU framework), sovereigns and private lenders. Part II examines also debt-influencing mechanisms, and with the exception of vulture funds that will be analysed in Part V, here we examine the role of export credits, credit rating agencies and bilateral investment treaties. Part III goes on to make the link between debt and the manner in which the accumulation of sovereign debt violates human rights. From there, Part IV examines some of the conditions imposed by structural adjustment programs on debtor states with a view to servicing their debt. All of these conditionalities have been shown to exacerbate the debt itself at the expense also of economic sovereignty. It is thus explained in Part IV that such measures are not only injurious to the entrenched rights of peoples, but that moreover they exacerbate the borrower’s economic situation. Finally, Part V addresses the range of practical responses to sovereign debt, such as odious debt claims, unilateral repudiation, establishment of debt audit committees and others.

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