NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Local Currency Bond Markets

John D. Burger, Francis E. Warnock

NBER Working Paper No. 12552
Issued in October 2006
NBER Program(s):   IFM

We analyze the development of 49 local bond markets. Our main finding is that policies and laws matter: Countries with stable inflation rates and strong creditor rights have more developed local bond markets and rely less on foreign-currency-denominated bonds. The results suggest that "original sin" is a misnomer. Emerging economies are not inherently dependent upon foreign-currency debt. Rather, by improving policy performance and strengthening institutions they may develop local currency bond markets, reduce their currency mismatch, and lessen the likelihood of future crises.

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Document Object Identifier (DOI): 10.3386/w12552

Published: Burger, John D., and Francis E. Warnock, 2006. "Local Currency Bond Markets," IMF Staff Papers 53 (Special Issue): 115-132.

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