Financial Data Transparency, International Institutions, and Sovereign Borrowing Costs

Copelovitch, M., Gandrud, C. & Hallerberg, M. (2018). Financial Data Transparency, International Institutions, and Sovereign Borrowing Costs. International Studies Quarterly, 62(1), pp. 23-41. doi: 10.1093/isq/sqx082

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Abstract

Recent events in international finance illustrate the close connection between the viability of a country's major private financial institutions and the sustainability of its sovereign debt. We explore the precise nature of this connection and the ways in which it shapes investors’ expectations of sovereign creditworthiness. We consider how investors use the overall level of information available about the private financial sector—and the potential risks it poses to government finances—when making decisions about investing in sovereign debt. We expect that governments providing more information about the private financial sector will have lower, and less volatile, borrowing costs. In order to test this argument, we create a new Financial Data Transparency (FDT) Index measuring governments’ willingness to release credible financial system data. Using the FDT and a sample of high-income OECD countries, we find that such transparency reduces sovereign borrowing costs. The effects are conditional on the level of public indebtedness. Transparent countries with low debt enjoy lower and less volatile borrowing costs.

Item Type: Article
Additional Information: This is a pre-copyedited, author-produced version of an article accepted for publication in International Studies Quarterly following peer review. The version of record Copelovitch, M., Gandrud, C. & Hallerberg, M. (2018). Financial Data Transparency, International Institutions, and Sovereign Borrowing Costs. International Studies Quarterly, 62(1), pp. 23-41. is available online at: https://doi-org.wam.city.ac.uk/10.1093/isq/sqx082.
Subjects: J Political Science
Divisions: School of Social Sciences > Department of International Politics
URI: http://openaccess.city.ac.uk/id/eprint/16477

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