Table of Contents

Regional Currency Areas in Financial Globalization

Regional Currency Areas in Financial Globalization

Edited by Patrick Artus, André Cartapanis and Florence Legros

This book is an up-to-date, authoritative and comprehensive analysis of the key issues and challenges facing regional currency area projects in the context of financial globalization. The authors focus on several central issues that emerged during the experiences of the 1990s and 2000s: exchange rate regimes and optimal currency area theory; exchange rate regimes in emerging countries, international capital markets and regional currency areas; EMU and the euro; exchange rate regimes in Central and Eastern Europe, Asia and Latin America; dollarization and the coordination of macroeconomic policies in the presence of regional currency areas.

Chapter 4: Emerging Sovereign Bond Markets: A View from the Extremes

Pierre Laurent and Jérôme Teïletche

Subjects: economics and finance, international economics, money and banking


Pierre Laurent and Jérôme Teïletche* INTRODUCTION Over the last decade, emerging sovereign bond markets have become an important source of diversification of portfolios for global investors. According to IIF data, between 1995 and 2001 these markets received more than US$43 billion per year. If we consider only the period between 1995 and 1997 (preceding the Asian and Russian crises), more than US$65 billion per year was received. For comparison, we should note these markets received less than US$18 billion per year of buying flows for equities (US$28 billion per year between 1995 and 1997). From an economic point of view, the sovereign bond markets (including Brady bonds and Euromarkets bonds) have become a major financing channel for these countries. In broad terms, emerging bond markets are classified as risky. This point is illustrated in Figure 4.1 where we represent the risk/return profiles obtained for several financial assets. Emerging bonds appear as the most profitable assets (the average return is the highest) but at the same time the riskiest ones. The risk involved in emerging bond markets is a crucial question, obviously for the investors in these zones but also for policy-makers. Indeed since the mid 1990s, crises in emerging markets have spread to the financial markets of industrial countries and, on occasion, they have hit the banking systems and affected cyclical developments in industrial countries. This has led policy-makers to intervene in markets (and notably central bankers) and...

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