How does country-specific macro uncertainty affect international debt securities denominated in local currency?

Qi Zhang (), Xue Sun () and Weining Wang ()
Additional contact information
Qi Zhang: Dongbei University of Finance and Economics
Xue Sun: Dongbei University of Finance and Economics
Weining Wang: Dongbei University of Finance and Economics

Review of World Economics (Weltwirtschaftliches Archiv), 2025, vol. 161, issue 4, No 1, 1255-1278

Abstract: Abstract This study investigates the impact of country-specific macro uncertainty on the currency denomination of international debt securities. By analyzing quarterly data on local currency debt securities issued in international market for 36 countries from 2010Q1 to 2021Q4, we find that economies with higher macro uncertainty are associated with fewer local-currency debt securities issued internationally. However, this association is weaker for global-currency economies and OECD economies. Besides, heightened domestic macro uncertainty can lead to exacerbated exchange rate volatility, higher risk premia, pessimistic sentiment among foreign investors as well as hindered economic growth, thereby reducing local currency debt securities. Meanwhile, the implementation of stricter macro-prudential regulations will help alleviate the adverse impact of macro uncertainty on local-currency debt securities issued internationally. Our findings provide deep insights into how uncertainty shapes local currency debt securities in the international market and the pivotal role of macro-prudential policies.

Keywords: Local currency denomination; International debt securities; Uncertainty; Macro-prudential policy (search for similar items in EconPapers)
JEL-codes: F34 G15 G28 G41 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10290-025-00588-2 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:weltar:v:161:y:2025:i:4:d:10.1007_s10290-025-00588-2

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10290/PS2

DOI: 10.1007/s10290-025-00588-2

Access Statistics for this article

Review of World Economics (Weltwirtschaftliches Archiv) is currently edited by Paul Bergin, Holger Görg, Cédric Tille and Gerald Willmann

More articles in Review of World Economics (Weltwirtschaftliches Archiv) from Springer, Institut für Weltwirtschaft (Kiel Institute for the World Economy) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().