Local Currency Bond Market Development in Sub-Saharan Africa: A Stock-Taking Exercise and Analysis of Key Drivers |
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Authors: | Dennis Essers Hans J Blommestein Danny Cassimon Perla Ibarlucea Flores |
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Institution: | 1. Institute of Development Policy and Management (IOB), University of Antwerp, Antwerp, Belgium;2. Public Debt Management and Bond Market Unit, OECD, Paris, France |
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Abstract: | This article studies the current state and drivers of government local currency bond market (LCBM) development in Sub-Saharan Africa. We first show that, increasingly, African governments issue fixed-rate local currency bonds with tenors of ten years and more on a regular basis. However, African LCBMs are also often marked by illiquidity, very few corporate securities, and narrow, bank-dominated investor bases. Second, we present an econometric analysis of the drivers of African government LCBMs based on a new high-quality, OECD-compiled panel dataset. LCBM capitalization is found to be correlated negatively with governments’ fiscal balance and inflation, and positively with common law legal origins, institutional quality and democracy. |
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Keywords: | local currency bonds public debt Sub-Saharan Africa |
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