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Debt Markets in Emerging Economies: Major Trends

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Abstract

This paper documents the major trends in debt (bank and bond) markets in emerging economies since the early 1990s, when these markets started expanding. The paper shows that banks have increased in size in most emerging economies though from low bases. But bond markets have expanded even more, gaining importance relative to banks. The nature of financing has also changed. Local currency bond financing has expanded, the extent of dollarization of loans and bonds has declined, and the maturity of public and private sector bonds has typically increased. However, not all regions have moved in the same direction. Eastern Europe for instance increased its foreign currency debt before the global financial crisis. Relative to developed countries, emerging countries’ financial systems still remain in many aspects underdeveloped. Except in a few cases, liquidity in secondary bond markets has been declining. And the public sector captures a significant share of bond markets.

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Notes

  1. For the links between financial development and growth, see, for example, King and Levine (1993a, 1993b), Levine and Zervos (1996), Levine (1997, 2005), and Luintel and Khan (1999). For the links between financial development and stability, see, for example, Acemoglu and Zilibotti (1997), Aghion et al. (1999), and Easterly et al. (2000).

  2. Given our focus on the largest emerging economies and mostly due to data availability, we do not cover countries in Africa or the Middle East.

  3. Our results for the 2000s are not qualitatively affected by the 2008 global financial crisis.

  4. The statistics are available from Preqin (www.preqin.com), the industry’s leading source of information where country-level information is not available. Therefore, regional statistics cited here include all countries geographically located within each region, making them different from the rest of this paper.

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Acknowledgements

This paper was prepared for the 19th Dubrovnik Economic Conference Symposium and follows work conducted for the World Bank Flagship Study, available in de la Torre et al. (2011) and Didier and Schmukler (2014). The authors received very helpful comments from Augusto de la Torre, Alain Ize, Evan Kraft, Eduardo Levy Yeyati, Luis Serven, Paul Wachtel, and participants at related presentations held at American University (Washington DC), the Asian Development Bank Institute (Tokyo), Bank of Korea International Conference 2011 (Seoul), Casa das Garças (Rio de Janeiro), Central Bank of Brazil (Rio de Janeiro), Central Bank of Paraguay (Asuncion), Central Bank of Uruguay (Montevideo), the 19th Dubrovnik Economic Conference (Dubrovnik), the 12th Global Development Network Annual Meeting (Bogota), Foro Internacional de Economía (Lima), International Monetary Fund (Washington DC), ITAM (Mexico, DF), the NIPFP-DEA Workshop (Delhi), Paraguay Ministry of Finance (Asuncion), University of Chile (Santiago de Chile), and the World Bank (Washington DC). The authors are grateful in particular to Juan Jose Cortina but also to Francisco Ceballos and Lucas Núñez for outstanding research assistance. Generous research support came from the World Bank’s Knowledge for Change Program and the Latin America and the Caribbean Region’s Chief Economist Office. The authors work for the World Bank in, respectively, the Office of the Chief Economist for the Latin America and the Caribbean Region and the Macroeconomics and Growth Team of the Development Research Group. The views expressed in this paper are those of the authors and do not necessarily represent those of the World Bank.

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  1. World Bank, Office of the Chief Economist for Latin America and the Caribbean, 1818 H Street NW, Washington, 20433, DC, USA

    Tatiana Didier

  2. Research Department, World Bank, 1818 H Street NW, Washington, 20433, DC, USA

    Sergio L Schmukler

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  1. Tatiana Didier
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  2. Sergio L Schmukler
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Didier, T., Schmukler, S. Debt Markets in Emerging Economies: Major Trends. Comp Econ Stud 56, 200–228 (2014). https://doi.org/10.1057/ces.2014.4

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