TY - JOUR
T1 - Does transparency pay? Evidence from IMF data transparency policy reforms and emerging market sovereign bond spreads
AU - Choi, Sangyup
AU - Hashimoto, Yuko
N1 - Publisher Copyright:
© 2018
PY - 2018/11
Y1 - 2018/11
N2 - Does an effort to enhance data transparency pay? We answer this question by analyzing the effect of the data transparency policy reforms, as reflected in subscriptions to the IMF's Data Standards Initiatives, namely, the Special Data Dissemination Standard (SDDS) and the General Data Dissemination System (GDDS), on the spreads of emerging market sovereign bonds. Employing a short-run event study with daily data, we convincingly show that market participants react to the transparency reform news positively. We then measure its medium-term effect, which is more relevant for economic decisions. By showing that the reform decision is largely independent of a country's macroeconomic development we mitigate endogeneity issues regarding a decision to adopt such reforms. On average, the adoption of the SDDS and GDDS lead to a 13% reduction in the spreads over one year, following such reforms. This finding is robust to various sensitivity tests, including careful consideration of overlapping events, controlling for additional variables, and a placebo test.
AB - Does an effort to enhance data transparency pay? We answer this question by analyzing the effect of the data transparency policy reforms, as reflected in subscriptions to the IMF's Data Standards Initiatives, namely, the Special Data Dissemination Standard (SDDS) and the General Data Dissemination System (GDDS), on the spreads of emerging market sovereign bonds. Employing a short-run event study with daily data, we convincingly show that market participants react to the transparency reform news positively. We then measure its medium-term effect, which is more relevant for economic decisions. By showing that the reform decision is largely independent of a country's macroeconomic development we mitigate endogeneity issues regarding a decision to adopt such reforms. On average, the adoption of the SDDS and GDDS lead to a 13% reduction in the spreads over one year, following such reforms. This finding is robust to various sensitivity tests, including careful consideration of overlapping events, controlling for additional variables, and a placebo test.
KW - Data transparency
KW - EMBIG spreads
KW - Event study
KW - Forecast error
KW - IMF Data Standards Initiatives
KW - Structural reforms
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U2 - 10.1016/j.jimonfin.2018.08.002
DO - 10.1016/j.jimonfin.2018.08.002
M3 - Article
AN - SCOPUS:85051477271
SN - 0261-5606
VL - 88
SP - 171
EP - 190
JO - Journal of International Money and Finance
JF - Journal of International Money and Finance
ER -