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The Future of the International Monetary System

Edited by Marc Uzan

Is the international financial architecture debate over? Not according to leading experts gathered together in this impressive volume who try to identify the key trends that will fashion the international financial system in the years ahead. As history has shown, the evolution of the international monetary system is a slow process. However, the authors argue that we may be entering a new era in which a combination of factors will have lasting consequences on the functioning of the international monetary system and the future role of the IMF.
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Chapter 5: The future of the sovereign debt market and its implication for the international financial institutions

Sergio Edeza


5. The future of the sovereign debt market and its implication for the international financial institutions Sergio Edeza INTRODUCTION The sovereign debt market is huge and the interplay between investors and issuers can be complex. This market is influenced by the different economic regimes in each issuer nation. In this chapter I shall provide some insights about its existence, while looking at developments that will give us some understanding about the future of this market. I shall premise my analysis on the following: (i) there are two types of sovereign debt markets, each country’s domestic debt market, and the cross-border or international debt market; (ii) the domestic debt market is governed by rules peculiar to every country, although similarities exist, and many rules are adopted from existing standards; (iii) a special (third) type of sovereign debt market is that of multilateral and bilateral lenders; and (iv) part of the existence of an international debt market stems from the underdevelopment of some domestic debt markets. THE DOMESTIC AND INTERNATIONAL SOVEREIGN DEBT MARKETS There are many reasons why sovereigns issue in both the domestic and international debt markets. While sovereigns issue for the purpose of funding their budgetary gaps, benchmark setting is also a reason for issuing sovereign debt papers. Domestic debt markets are more or less captive to the rules of the sovereign issuer, while in the international debt markets the sovereign is one among many issuers playing by the same rules. The international debt market, therefore, caters to...

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