Do Financial Markets Value Quality of Fiscal Governance?

Kady Keita (), Gene Leon () and Frederico Lima ()
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Kady Keita: University of Orléans
Gene Leon: Caribbean Development Bank
Frederico Lima: International Monetary Fund

Open Economies Review, 2021, vol. 32, issue 5, No 4, 907-931

Abstract: Abstract We examine the link between the quality of fiscal governance and access to market-based external finance. Stronger fiscal governance is associated with improvements in several indicators of market access, including a higher likelihood of issuing sovereign bonds and having a sovereign credit rating, receiving stronger ratings, and obtaining lower spreads. Using the more granular information on quality of fiscal governance from Public Expenditure and Financial Accountability (PEFA) assessments for 89 emerging and developing economies, we find that similar indicators of market access are correlated with sound public financial management practices, especially those that improve budget transparency and reporting, debt management, and fiscal strategy.

Keywords: Fiscal governance; Public financial management; Sovereign bond; Credit rating; F34; G15; H63 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s11079-021-09652-4

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