Winners and Losers from Sovereign Debt Inflows
We study the transmission of sovereign debt inflow shocks on domestic firms. We exploit episodes of large sovereign debt inflows in six emerging countries that are due to the announcements of these countries' inclusion in two major local-currency sovereign debt indexes. We show that these episodes significantly reduce government bond yields and appreciate the domestic currency, and have heterogeneous stock market effects on domestic firms. Firms operating in tradable industries experience lower abnormal returns than firms in non-tradable industries. In addition, financial, government-related, and firms that rely more on external financing experience relatively higher abnormal returns. The effect on financial and government-related firms is stronger in countries that display larger reductions in government bond yields. The effect on tradable firms is stronger in countries where the domestic currency appreciates more. We provide a stylized model that rationalizes these results. Our findings shed novel light on the channels through which sovereign debt inflows affect firms in emerging economies.
-
-
Copy CitationFernando Broner, Alberto Martin, Lorenzo Pandolfi, and Tomas Williams, "Winners and Losers from Sovereign Debt Inflows," NBER Working Paper 27772 (2020), https://doi.org/10.3386/w27772.Download Citation
Published Versions
Winners and Losers from Sovereign Debt Inflows, Fernando Broner, Alberto Martin, Lorenzo Pandolfi. in NBER International Seminar on Macroeconomics 2020, Tesar. 2021
Broner, Fernando & Martin, Alberto & Pandolfi, Lorenzo & Williams, Tomas, 2021. "Winners and losers from sovereign debt inflows," Journal of International Economics, Elsevier, vol. 130(C). citation courtesy of 
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
