The Effect of Private Sector FX Indebtedness on Sovereign Risk in Emerging Markets

Abstract

In this study, the spread of default risk on local currency (LC) sovereign bonds serves as the metric for assessing country risk across 17 emerging nations. Despite traditional theoretical views deeming these bonds risk-free or default-free, recent research indicates that they carry a risk premium and are not priced at risk-free interest rates. The intriguing explanation lies in the cost of printing money. When local companies have excessive FC debt funded by LC assets, then printing money to pay LC debt will trigger an inflationary process, eventually ending up with a collapse in the real economy and LC. Thus, we run a panel VAR model, spanning a period between 2010-2020, where LC sovereign default risk, LC public debt, FC public debt, private sector external debt, and external finance need are included in the main model. Results show that public debt in LC and private external debt are found to be positively associated with LC sovereign spread, in line with the literature. However, the observation that the need for one-year external financing relative to gross reserves has a much stronger effect on the country's risk premium than the total effect of private sector external debt and public debt in local or foreign currency represents an original contribution of this study.

Keywords

• Panel VAR
• Sovereign Risk
• Impulse-Response
• External Finance Need
• Private Sector External Debt

Gelişmekte Olan Ülkelerde Özel Sektör Döviz Borçluluğunun Ülke Riskine Etkisi

Abstract

Son dönem literatürde, teoride risksiz kabul edilen yerel para cinsinden devlet tahvillerinin bir risk primi ile fiyatlandığı görülmektedir ve bunun sebebi özel sektörün taşıdığı yüksek döviz borcundan dolayı para basarak borç ödemenin maliyetlerini göze alamayıp temerrüdü tercih etme olasılıklarıdır. Bu çalışmada 17 gelişmekte olan ülkenin yerel para cinsinden tahvillerinin temerrüt riski primi ülke riski göstergesi olarak alınarak; 2010-2020 arası dönemde mili gelire oranla kamunun döviz borcu, kamunun yerel para cinsinden borcu, özel sektörün dış borcu ve brüt rezervlere oranla kısa vadeli dış borç, bir yıllık dış finansman ihtiyacı olmak üzere toplam 5 değişkenle beraber panel VAR yöntemi kullanılarak nedensellik analizleri ve etki-tepki fonksiyonları incelenmiştir. Literatürle uyumlu olarak milli gelire oranla özel sektör döviz borçluluğundaki artışların, ülke risk primini arttıcı etkiye sahip olduğu görülmüştür. Brüt rezervlere oranla bir yıl vadeli dış finansman gereksiniminin, ülke risk primi üzerinde özel sektör dış borçluluğu ve yerel veya yabancı para birimi cinsinden kamu borçluluğunun toplam etkisinden çok daha güçlü bir etkiye sahip olduğunun görülmesi, bu çalışmanın özgün katkısı olarak öne çıkmaktadır.

Keywords

• Panel VAR
• Ülke Riski
• Etki-Tepki
• Dış Finansman İhtiyacı
• Özel Sektör Dış Borcu

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