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Fiscal Transparency, Borrowing Costs, and Foreign Holdings of Sovereign Debt
Author:
Laurent Kemoe null

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Zaijin Zhan
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Series:
IMF Working Papers
Volume/Issue:
Volume 2018: Issue 189
Language:
English
Publication Date:
24 Aug 2018
DOI:
https://doi.org/10.5089/9781484373835.001
ISBN:
9781484373835
ISSN:
1018-5941
Pages:
33
Keywords:
WP; financial risk; debt sustainability issue; EMBI index; interest rate; Fiscal transparency; Borrowing costs; Emerging market economies; investors holding; risk appetite; EM debt; influence investors decision making; investor inflow; EMBI yield spread; Government finance statistics; Emerging and frontier financial markets; Budget planning and preparation; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper explores the effects of fiscal transparency on the borrowing costs of 33 emerging and developing economies (EMs), and on foreign demand for their sovereign debt. Using multiple indicators, including a constructed one based on the published data in the IMF’s Government Finance Statistics Yearbook, we measure the separate effects of the three dimensions of fiscal transparency: openness of the budget process, fiscal data transparency, and accountability of fiscal actors. The results suggest that higher fiscal transparency reduces sovereign interest rate spreads and increases foreign holdings of sovereign debt, with each dimension of fiscal transparency playing a different role. Availability of detailed cross-country comparable fiscal data, especially for balance sheet items, has shown to increase foreign investors’ willingness in holding EM sovereign debt.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund