The Banking Sector, Government Bonds, and Financial Intermediation: The Case of Emerging Market Countries

F. Gulcin Ozkan; Ahmet Kipici; Mustafa Ismihan

doi:10.2753/REE1540-496X460404

The Banking Sector, Government Bonds, and Financial Intermediation: The Case of Emerging Market Countries

F. Gulcin Ozkan, Ahmet Kipici, Mustafa Ismihan

Economics

Research output: Contribution to journal › Article › peer-review

Abstract

This paper develops an analytical framework to explore how financial-sector characteristics shape the terms and the scale of public borrowing in emerging market economies. We find that the more competitive the banking sector and the more liquid and deeper the deposit market, the better are conditions in the public securities market. We also show that the greater the central bank independence, the higher the cost of public borrowing. Furthermore, our results suggest that, in countries where banks rely significantly on foreign currency financing, the greater the government's reliance on bank lending, the greater is its exposure to exchange rate risk.

Original language	English
Pages (from-to)	55-70
Number of pages	16
Journal	Emerging Markets Finance and Trade
Volume	46
Issue number	4
DOIs	https://doi.org/10.2753/REE1540-496X460404
Publication status	Published - 2010

Bibliographical note

M1 - 4

Keywords

cost of borrowing
financial sector
public debt
PUBLIC DEBT
INDEPENDENCE
CURRENCY
POLICY

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10.2753/REE1540-496X460404

http://mesharpe.metapress.com/app/home/contribution.asp?referrer=parent&backto=issue,5,8;journal,27,73;linkingpublicationresults,1:111024,1

Cite this

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title = "The Banking Sector, Government Bonds, and Financial Intermediation: The Case of Emerging Market Countries",

abstract = "This paper develops an analytical framework to explore how financial-sector characteristics shape the terms and the scale of public borrowing in emerging market economies. We find that the more competitive the banking sector and the more liquid and deeper the deposit market, the better are conditions in the public securities market. We also show that the greater the central bank independence, the higher the cost of public borrowing. Furthermore, our results suggest that, in countries where banks rely significantly on foreign currency financing, the greater the government's reliance on bank lending, the greater is its exposure to exchange rate risk.",

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AB - This paper develops an analytical framework to explore how financial-sector characteristics shape the terms and the scale of public borrowing in emerging market economies. We find that the more competitive the banking sector and the more liquid and deeper the deposit market, the better are conditions in the public securities market. We also show that the greater the central bank independence, the higher the cost of public borrowing. Furthermore, our results suggest that, in countries where banks rely significantly on foreign currency financing, the greater the government's reliance on bank lending, the greater is its exposure to exchange rate risk.

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KW - public debt

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KW - INDEPENDENCE

KW - CURRENCY

KW - POLICY

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ER -

The Banking Sector, Government Bonds, and Financial Intermediation: The Case of Emerging Market Countries

Abstract

Bibliographical note

Keywords

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