The determinants of ‘domestic’ original sin in emerging market economies

Arbeitspapier

This paper explains why domestic debt composition in emerging economies is risky. It carries out an analysis of the determinants of ‘domestic’ original sin, which refers to the inability of emerging economies to borrow domestically in local currency, at long maturities and fixed interest rates. The latter is a measure of financial vulnerabilities arising from domestic debt composition, which encompasses maturity mismatches, rollover risk and interest payment contingency. The paper builds on a large dataset compiled by the authors from national sources. It finds that domestic original sin is severe when inflation is lofty, the debt service-to-GDP ratio high, the slope of the yield curve inverted and the investor base narrow. These results suggest that sound macroeconomic policies, attractive long-term yields and policies aimed at widening the investor base are instrumental to reduce domestic debt riskiness and tilt its composition towards safer, long-term, unindexed, local currency instruments.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ECB Working Paper ; No. 560

Klassifikation und Themen

• Klassifikation: Wirtschaft ; International Lending and Debt Problems ; Open Economy Macroeconomics ; International Financial Markets
• Thema: domestic debt ; emerging economies ; Original sin ; Schulden ; Öffentliche Schulden ; Schwellenländer

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Mehl, Arnaud ; Reynaud, Julien
• Ereignis: Veröffentlichung
• (wer): European Central Bank (ECB)
• (wo): Frankfurt a. M.
• (wann): 2005

Weitere Informationen

• Handle: http://hdl.handle.net/10419/152994
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ