The External Financing of Emerging Market Countries

Abstract

We trace the history of where and why investors from the most advanced countries directed funds, ultimately helping finance economic development in emerging market countries. To do this, we analyze the determinants of international investors'' willingness to hold the external liabilities issued by emerging market countries, through cross-country regressions for both prices (bond spreads) and quantities (bond market capitalization or stocks of external liabilities) estimated at various points during two waves of financial globalization (1870-1913 and the present time). The data are drawn from primary sources for the historical period, and the much-expanded, new vintage of the Lane and Milesi-Ferretti (2006) data set for the modern period. The results suggest that, throughout the past one and a half centuries, a combination of human capital (including informal human capital) and institutional quality has been a key determinant of emerging market countries'' ability to attract international investors.Emerging markets;Capital flows;External financing;primary enrollment, bond, bonds, school enrollment, primary school, bond yields, primary school enrollment, financial globalization, financial derivatives, educational attainment, international finance, primary education, sovereign bond, bond spreads, formal education, primary school students, sovereign bonds, emerging market bond, international capital, market bond, primary enrollment rates, bond index, government bonds, bond market capitalization, enrollment rates, gross enrollment, bond market, international capital markets, debt stocks, access to international bond markets, bond issues, enrollment data, school-age population, individual bonds, sovereign bond market, financial markets, international bond markets, bond markets, stock exchange, arithmetic, technological advances

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Research Papers in Economics

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Last time updated on 10/24/2014

This paper was published in Research Papers in Economics.

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