The determinant of international sovereign bond financing in developing countries

Abstract

Governments need to secure finance for their country’s public projects. There are various ways for governments to acquire funds, for example, through taxation, borrowing money from international banks, issuing government bonds, and so on. For developing countries, a government may consider issuing international sovereign bonds to meet the country’s financial needs. This thesis looks at the determinants of international sovereign bond financing by 36 emerging economies using data collected from the Bloomberg terminal on international sovereign bonds issued between 1996 and 2016. The thesis adopts the discrete choice logit-fixed effect model to empirically verify factors suggested by S&P (2014) that determine international bond issuance. Among five factors, government effectiveness is found to be statistically significant and positively related international bond issuance. Other factors such as GDP growth, Trade, and General government final consumption expenditure, were found to be positively related to international sovereign bond issuance but were not statistically significant.