OECD Development Centre Working Papers
The OECD Development Centre links OECD members with developing and emerging economies and fosters debate and discussion to seek creative policy solutions to emerging global issues and development challenges. This series of working papers is intended to disseminate the OECD Development Centre’s research findings rapidly among specialists in the field concerned. These papers are generally available in the original English or French, with a summary in the other language.
- ISSN: 18151949 (online)
- https://doi.org/10.1787/18151949
New Strategies for Emerging Domestic Sovereign Bond Markets
The forces shaping the revolution in banking and capital markets have radically changed
the financial landscape during the past three decades. A remarkable feature of this changing new
landscape has been the astonishing rate of internationalisation of the financial system in the last
two decades, with emerging markets becoming increasingly important participants. At times,
this participation led to an excessive reliance on foreign financing, making the participation of
these countries in the global financial system more vulnerable to shifts in expectations and
perceptions. The sovereign debt management strategy suffered from many structural
weaknesses, failing to take into account international best practices in financing budget deficits
and developing domestic government securities markets. Consequently, emerging markets
experienced serious financial crisis episodes. Against this background, the paper focuses on new
and more sophisticated strategies to develop domestic bond markets, taking into account the risk
profile, complexities and other constraints of emerging markets. The paper’s central thesis is that
risk-based public debt management and liquid domestic bond markets are important, mutually
reinforcing strategies for emerging financial markets to attain: i) enhanced financial stability, and
ii) a more successful participation in the global financial landscape. It will also be shown that this
twin-strategies approach requires taking a macroeconomic policy perspective.
Keywords: risk-management, ermerging bond markets, global finance
JEL:
G32: Financial Economics / Corporate Finance and Governance / Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill;
N26: Economic History / Financial Markets and Institutions / Economic History: Financial Markets and Institutions: Latin America; Caribbean;
G15: Financial Economics / General Financial Markets / International Financial Markets
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