The impact of fiscal policy on government bond spreads in emerging markets

Žigman, Ante; Cota, Boris

doi:10.3326/fintp.35.4.1

Cited by 12 publications

(8 citation statements)

References 26 publications

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“…A more effective way to influence the spread in bond markets in a nascent stage of development (as they are in Mexico) would be through federal policy. As Zigman and Cota () point out, a trustworthy fiscal policy can contribute to reduce risks, produce a better organization of public debt instruments and, in general, underpin economic growth. They suggest that a credible fiscal policy should be pursued so as to reduce the cost of government borrowing to the smallest possible measure.…”

Section: Findings and Discussionmentioning

confidence: 99%

“…This has been an important goal in Europe's plan to integrate capital markets because it facilitates the creation of more homogeneous securities that can be offered to a much larger potential market (Pagano & von Thadden, ), but to what extent is government intervention useful in promoting convergence? As Zigman and Cota () explain, identifying the influence of fiscal and nonfiscal factors on movements in spreads can be of great importance for the conduct of fiscal policy. Fiscal policy, as they correctly point out, can help reduce the costs of government borrowing, reduce risks, induce a better organization of public debt instruments, and underpin economic growth.…”

Section: Background Literaturementioning

confidence: 99%

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Subnational Bond Market Development: What Drives the Yield Spreads of Mexican Cebures?

Espinosa¹

2013

Latin American Policy

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A robust market for subnational bonds can provide emerging economies with additional tools to accelerate their economic growth. This article seeks to trigger a reflection on the factors that emerging nations such as Mexico would need to take into account if the aim is to issue bond instruments that are attractive to investors. This study assesses the factors affecting the yield spread of a sample of Mexican bonds known as Cebures. The analysis shows that only variables associated with the structure of the bond affect such yield spreads, not factors reflecting the financial strength of the issuing entity. Government policies aimed at modifying the implicit risk of this type of bonds may not be sufficient to alter bond buyer's risk perceptions.Un mercado de bonos subnacionales robusto puede dar a las economías emergentes herramientas adicionales para acelerar su desarrollo económico. Este artículo busca iniciar una reflexión sobre los factores que naciones emergentes como México deberían tomar en cuenta si el objetivo es emitir instrumentos de deuda atractivos a los inversionistas. El estudio evalúa los factores que afectan la dispersión del rendimiento de una muestra de bonos Mexicanos conocidos como Cebures. El análisis muestra que las variables que afectan la dispersión del rendimiento están asociadas con la estructura del bono y no con factores que reflejan la fortaleza financiera de la entidad emisora. Las políticas gubernamentales que busquen modificar el riesgo implícito en este tipo de bonos pueden no ser suficientes para alterar las percepciones de riesgo de los inversionistas.

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Section: Findings and Discussionmentioning

confidence: 99%

Section: Background Literaturementioning

confidence: 99%

Subnational Bond Market Development: What Drives the Yield Spreads of Mexican Cebures?

Espinosa¹

2013

Latin American Policy

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“…Beyond investor's perception, several factors could impact government securities interest rates. Indeed, studies (Gale andOrszag, 2002, Engen andHubbard, 2004;Edwards, 1986;Zigman and Cota, 2011) showed that the budget deficit, inflation, the degree of openness of the economy and global liquidity significantly determine government securities interest rate. Very few studies (Diouf and Boutin-Dufresne, 2012;Hitaj and Onder, 2013) focused on the determinants of government securities yields in WAEMU Countries.…”

Section: Introductionmentioning

confidence: 99%

What Drives Government Security Yields in Developing Countries? Evidence from the Countries in the West African Economic and Monetary Union (WAEMU)

Soumaila¹

2019

jeb

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“…In comparison with monetary policy, although less attention has been paid to investigate the association between fiscal policy and the financial sector (Ardagna, 2009;Blanchard et al, 2010) there is sufficiently enough evidence to support the notion of financial stability being also influenced by fiscal stance (see Blanchard et al 2010;Zigman and Cota, 2011;Benigno et al;2013). Nevertheless, beside the individual analysis of macroeconomic policies, there is an emerging consensus in recent literature which suggests considering interaction of macroeconomic policies rather than implication of a single policy stance for financial sector (see Jansen et al, 2008;Nasir and Soliman, 2014) which is also the theme of this study.…”

Section: Introductionmentioning

confidence: 99%

Institutional Design, Macroeconomic Policy Coordination and Implications for the Financial Sector in the UK

Nasir

Yagob

Solimanc

et al. 2017

Journal of Central Banking Theory and Practice

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This study has analysed the implications of institutional design of macroeconomic policy making institutions for the macroeconomic policy interaction and financial sector in the United Kingdom. Employing a Vector Error Correction (VEC) model and using monthly data from January 1985 to August 2008 we found that the changes in institutional arrangement and design of policy making authorities appeared to be a major contributing factor in dynamics of association between policy coordination/combination and financial sector. It was also found that the independence of the Bank of England (BoE) and withdrawal from the Exchange Rate Mechanism led to the increase in macroeconomic policy maker's ability to coordinate and restore financial stability. The results imply that although institutional autonomy in the form of instrument independence (monetary policy decisions) could bring financial stability, there is a strong necessity for coordination, even in Post-MPC (Monetary Policy Committee) and the BoE independence.

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The impact of fiscal policy on government bond spreads in emerging markets

Cited by 12 publications

References 26 publications

Subnational Bond Market Development: What Drives the Yield Spreads of Mexican Cebures?

Subnational Bond Market Development: What Drives the Yield Spreads of Mexican Cebures?

What Drives Government Security Yields in Developing Countries? Evidence from the Countries in the West African Economic and Monetary Union (WAEMU)

Institutional Design, Macroeconomic Policy Coordination and Implications for the Financial Sector in the UK

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