An Analysis of the Association between Foreign Investors Holdings and the Local Currency Sovereign Debt Yields

<p>This study examines the association between foreign investors holdings of local currency sovereign debt on the corresponding debt yields. It includes a multi-country study encompassing 12 emerging markets and 17 advanced economies, as well as a single-country study focusing on Indonesia. By analyzing the association of foreign holdings on the corresponding 5- and 10-year debt yields on a combined data set of advanced economies and emerging markets, the multi-country study employing a quarterly data set from March 2011 to December 2019 accomplishes an analysis that was absent from previous literatures. Although previous literatures have found a negative association when using data sets from either advanced economies or emerging markets exclusively, it is intriguing to observe that while the overall findings from the combined data set remain consistent, however focusing solely on the association in emerging markets renders the findings inconsistent. By employing of a binary variable analysis, it becomes evident that the association between the change in foreign holdings and the change in debt yields differs in magnitude between emerging markets and advanced economies. While theory clearly indicates that capital inflows (i.e. foreign investors holdings) should reduce the level of interest rates (i.e. debt yields), it does not give a clear prediction for what happens to volatility and different views have been offered on this question. The single-country employing a daily data set from 1 January 2014 to 31 December 2019 offers a unique opportunity to study this question. The findings show that the inflows result in lower volatility, suggesting that foreign investors have a stabilizing effect on the market across all debt yield maturities. </p>

Name thesis:degree_name

Economics, PhD

Level thesis:degree_level

Open Access Dissertation

Discipline thesis:degree_discipline

School of Social Science, Politics, and Evaluation

Year dc:date.available

2024

Author dc:creator

• Slamet, Yudistira Surjadi

Contributors dc:contributor

• Pierangelo De Pace
• Levan Efremidze

• foreign holdings
• sovereign debt yield
• Economics

Repository record dc:identifier

https://scholarship.claremont.edu/cgu_etd/849

OAI identifier oai:identifier

oai:scholarship.claremont.edu:cgu_etd-1870