Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/203403 
Year of Publication: 
2018
Series/Report no.: 
ADB Economics Working Paper Series No. 563
Publisher: 
Asian Development Bank (ADB), Manila
Abstract: 
It is widely believed that local currency bond markets (LCBMs) can promote financial stability in developing countries. For instance, they can help mitigate the currency and maturity mismatch that contributed to the outbreak of the Asian financial crisis of 1997-1998. In this paper, we empirically test such conventional wisdom on the stabilizing effect of LCBMs. To do so, we analyze and compare the financial vulnerability of developing countries during two episodes of financial stress - global financial crisis and taper tantrum. During the two episodes, we find a negative association between the growth of LCBMs and the degree of currency depreciation in emerging economies. Similar association is found of bank loans but not for the stock market.
Subjects: 
Asian financial crisis
bonds
currency mismatch
developing countries
financial stability
local currency bond markets
maturity mismatch
JEL: 
E44
F34
F38
F42
F62
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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