The Determinant of International Government Bond Financing in ASEAN, Eastern Europe, Latin America and Sub-Saharan Africa
Thanatcha Varaputtanon
Chulalongkorn University, Thailand
Abstract
Over the past decade, domestic bond and international sovereign bonds have been issued by the government globally to finance a country. Bond financing has become one of an important part of the countries’ financing. Unlike developed countries, issuing bond domestically can help raising fund as their people have a specific level of income, developing countries, which their people have lower level of income as well as poor standard of living, issuing bond domestically will not be a good channel for raising fund. Thus, the governments need to issue bond internationally, to raise fund from other countries. This paper looks at the determinants of International Government Bond financing across ASEAN, Eastern Europe, Latin America and Sub-Saharan Africa. The data set is international government bonds which are issued between 1996-2016. This study aims to examine how external and internal factors, which are Institutional Effectiveness, Economic Structure and Growth, Fiscal Flexibility, Monetary Flexibility and Global Liquidity, affecting the probability of a country to issue international government bond. In order to provide a detailed analysis of the probability of bond issuance, this paper applied a discrete choice logit model for binary choice (yes, no) responses to the determinant of bond issuance. To sum up, in comparison with countries which do not issue bond, a country tends to issue bond is having higher rate of government effectiveness. Economic Structure and Growth, Monetary Flexibility, Fiscal flexibility and Global liquidity do not have correlation on international bond issuance. International government bond issuance also depends on the country’s characteristic.