Capital flows and sovereign debt markets: Evidence from index rebalancings

• 成果类型: Article
• 署名作者: Pandolfi, Lorenzo; Williams, Tomas
• 署名单位: University of Naples Federico II; George Washington University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2018.10.008
• 发表日期: 2019
• 页码: 384-403
• 关键词: sovereign debt; International capital flows; Index rebalancings; Mutual funds; BENCHMARK INDEXES

摘要

We analyze how capital flows into the sovereign debt market affect government bond prices, liquidity, and exchange rates. To address endogeneity concerns, we construct a measure of informationless capital Flows Implied by (mechanical) Rebalancings (FIR) in the largest emerging markets local currency government debt index. FIR is associated with higher returns and greater depth in the sovereign debt market after the rebalancings. Also, larger inflows (outflows) are associated with greater currency appreciations (depreciations). Our results highlight the increasing importance of capital flows driven by demand shocks, due to the growing relevance of benchmark indexes as the preferred habitat for institutional investors. (C) 2018 Elsevier B.V. All rights reserved.