Who Holds Sovereign Debt and Why It Matters
73 Pages Posted: 1 Jun 2022 Last revised: 24 Apr 2023
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Who Holds Sovereign Debt and Why It Matters
Who Holds Sovereign Debt and Why it Matters
Who Holds Sovereign Debt and Why it Matters
Date Written: April 22, 2023
Abstract
This paper studies the impact of investor composition on the sovereign debt market. We construct an aggregate data set of sovereign debt holdings by foreign and domestic bank, non-bank private, and official investors for 95 countries over twenty years. We find that private non-bank investors absorb most of the increase in sovereign debt supply. We further find that foreign non-bank investor demand is most responsive to the yield for emerging market (EM) debt, while yield elasticity for all investors is much lower for advanced economy debt. We show that EM sovereigns are highly vulnerable to losing their foreign non-bank investors.
Keywords: Sovereign debt, Banks and Non-banks, Advanced Economies and Emerging Markets
JEL Classification: F34, G11, G15, F41
Suggested Citation: Suggested Citation