Foreign bond investors and market discipline

Research output: Contribution to journalArticlepeer-review


This article scrutinizes the impact of foreign bond ownership on market discipline, that is the mutual responsiveness of financial markets and sovereign borrowers. The empirical investigation covers 12 advanced economies during the Great Moderation (1981-2008). This article finds no evidence that foreign bond investors affect the sensitivity of bond spreads to fiscal policy. Reversely, results show that government responsiveness to market pressure is contingent on the make-up of its investor base. Bond spreads spur on fiscal consolidation. The larger the share of foreign bond investors the bigger this effect.
Original languageEnglish
Pages (from-to)3-25
JournalCompetition and Change
Issue number1
Early online date5 Sep 2019
Publication statusPublished - 1 Jan 2020


  • bond markets
  • debt management
  • fiscal consolidation
  • government debt
  • market discipline

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