The effects of fiscal opacity on sovereign credit spreads

Measuring accrual-based IPSAS implementation and its relationship to central government fiscal transparency

“…Advocating a comparable index across countries and methodological soundness, the IBP conducts primary data questionnaires that are completed by independent researchers in each country and blindly reviewed by two country experts, acquires feedback from government, and makes final decisions scored by the IBP team based on citations and attaches them to relevant documents (De Renzio & Masud, 2011;IBP, 2012). The IBP has released OBI surveys in 2006,2008,2010,2012,2015, and 2017 and has been empirically used by several researchers to investigate the determinants of fiscal transparency (see Arapis & Reitano, 2017;Wehner & Renzio, 2013) and its impacts (see Blume & Voigt, 2013;Peat, Svec, & Wang, 2015).…”

Fiscal Transparency, Borrowing Costs, and Foreign Holdings of Sovereign Debt

“…Our results contrast with a more recent study on the effect of fiscal (or budget) transparency on emerging markets' borrowing costs. Peat, Svec and Wang (2015) find that fiscal opacity matters mostly for advanced economies, and more so for medium-OBI countries than for high-or low-OBI countries. 21 They conclude that the sovereign credit market pays less attention to the fiscal opacity of emerging countries.…”

“…The correlation between OBI and PRR for high transparency is 0.0934 and is not statistically different from zero, leading us to conclude that the positive and significant correlation of 0.359 that we found between the two variables only reflects the situation in low-OBI countries.21 To sort countries by low-, medium-and high-OBI categories,Peat, Svec and Wang (2015) run a piecewise regression using searched knots. Alternatively, the knots are fixed at the 33rd and 66th percentiles of OBI.…”

“…21 They conclude that the sovereign credit market pays less attention to the fiscal opacity of emerging countries. While Peat, Svec and Wang (2015)'s specification is similar to ours, the dependent variable they use (Sovereign CDS spreads) is different from ours (EMBI), which is a more direct measure of borrowing costs, rather than a measure of the insurance premium against possible default risks. Besides, the authors' focus is not on emerging markets as is our case, which may explain their use of CDS spreads instead of EMBI, as the latter is not available for advanced economies.…”

“… The OBS was conducted in 2006, 2010, 2012, 2015, and 2017. Due to major changes in methodology, the 2014 edition of the survey was postponed to 2015.…”