Abstract

JIMENEZ-SOTELO, Renzo A.. The influence of domestic public debt market in the financial development: Evidence of 52 countries in 1990-2020. El trimestre econ [online]. 2023, vol.90, n.359, pp.773-804.  Epub Jan 19, 2024. ISSN 2448-718X.  https://doi.org/10.20430/ete.v90i359.1775.

The objective of the study is to determine if a policy of preference for the domestic public debt market influences the development of the respective financial system. Using panel data techniques, I tested the causal relationship between the domestic marketing of public debt securities and eight indicators of financial development. For this, I used static regression models with fixed effects computed by ordinary least squares (OLS) or dynamic regression models with fixed effects computed by the generalized method of moments (GMM) in differences, depending on each case. I also used random effects models controlled by fixed effects calculated by two-stage least squares (2SLS). By rejecting the null hypothesis that the literature has been assuming as true, it was confirmed that the traditional theories of financial development were incomplete. Although the research shows that the preference for the domestic public debt securities market influences financial development -and therefore economic development-it does not explain why it hasn’t been given greater importance in less developed countries. The formulation of that answer would be more related to the fields of study in which ethics and politics move.

Keywords : Sovereign curve; panel data; sovereign debt; economic development; security market; financial policy; monetary policy; financial systems.