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.

*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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