An empirical analysis of Diaspora bonds

Şule AKKOYUNLU, Max STERN

Abstract


Abstract. This study is the first to investigate theoretically and empirically the determinants of Diaspora Bonds for eight developing countries (Bangladesh, Ethiopia, Ghana, India, Lebanon, Pakistan, the Philippines, and Sri-Lanka) and one developed country - Israel for the period 1951 and 2008. Empirical results are consistent with the predictions of the theoretical model. The most robust variables are the closeness indicator and the sovereign rating, both on the demand-side. The spread is not significant, suggesting Diaspora Bonds differ from normal investments. Good governance and wars are also important demand-side determinants of Diaspora Bonds. Among the supply-side factors; FDI, ODA, foreign exchange, inflation, external debt and remittances significantly determine the issue of Diaspora Bonds. Most importantly, this study is able to make predictions of the most promising candidate countries in issuing Diaspora Bonds in the future.

Keywords. Diaspora Bonds, Supply-side, Demand-side.

JEL. F21, F24, F34, F35, G38, H62, H63.

Keywords


Diaspora Bonds; Supply-side; Demand-side.

Full Text:


References


Abdih, Y., Chami, R., Dagher, J., & Montiel, P. (2008). Remittances and institutions: Are remittances a curse?, IMF Working Paper, No.08/29. Access: 17.08.09. [Retrieved from].

Adams, R.H., Cuecuecha, A. & Page, J. (2008). The impact of remittances on poverty and inequality in Ghana, World Bank Policy Research Working Paper No.4732. Access: 17.08.09. [Retrieved from].

Agarwal, J.P., Gubitz, A. & Nunnenkamp, P. (1991). Foreign Direct Investment in Developing Countries: The Case of Germany, Kieler Studien, J.C.B. Mohr, Tübingen.

Akkoyunlu, S. (2008). Are Turkish migrants altruistic? Evidence from the macro data. Paper presented at the Developments in Economic Theory and Policy Conference, 2-3 July 2009 in Bilbao and XXIV National Conference of Labour Economics 24-25 September 2009 in Sassari.

Ancelet, S., Etienne, M.-P., Benoît, H. & Parent, E. (2009). Modelling spatial zero-inflated continuous data with an exponentially compound poisson process, Environmental and Ecological Statistics (forthcoming). Access: 23.10.2009 [Retrieved from].

Blue, S.A. (2004). State policy, economic crisis, gender, and family ties: Determinants of family remittances to Cuba, Economic Geography, 80(1), 63-82. doi. 10.1111/j.1944-8287.2004.tb00229.x

Bulow, J. & Rogoff, K. (1989). Sovereign debt: Is to forgive to forget?, The American Economic Review, 79(1), 43-50.

Chami, R., Barajas, A., Cosimano, T., Fullenkamp, C., Gapen, M., & Montiel, P. (2008). Macroeconomic consequences of remittances, IMF Occasional Paper, No.259. Access: 17.08.09. [Retrieved from].

Chander, A. (2001). Diaspora bonds, New York University Law Review, 76, 1005-1099.

Department for International Development (UK) (2008). Termination Note from the Lead Adviser: Diaspora Bonds Bangladesh. Mimeo, document received from Ms. Scholastica Gomes, Corporate Business Ocer, DFID Bangladesh.

Desbordes, R., & Vicard, V. (2009). Foreign direct investment and bilateral investment treaties: An international political perspective, Journal of Comparative Economics, 37(3), 372-386. doi. 10.1016/j.jce.2009.05.001

Doornik, J.A., & Hendry, D.F. (2001). Modelling Dynamic Systems Using PcGive, Vol. II, Timberlake Consultants Press, London.

Drazen, A. (1998). Towards a political economic theory of domestic debt, in G. Calvo & M. King, (Eds), The Debt Burden and its Consequences for Monetary Policy' MacMillan, London.

Eaton, J., & Gersowitz, M. (1981). Debt with potential repudiation: Theoretical and empirical analysis, Review of Economic Studies, 48(2), 289-309. doi. 10.2307/2296886

Eichengreen, B. & Mody, A. (2000). What explains changing spreads on emerging market debt?, in S. Edwards, (Ed), Capital Flows and the Emerging Economies: Theory, Evidence and Controversies, University of Chicago Press, Chicago.

Feeny, S., & McGillivray, M. (2003). Aid and public sector borrowing in developing countries, Journal of International Development, 15(8), 989-998. doi. 10.1002/jid.1028

Fischer, S., & Easterly, W. (1990). The economics of the government budget constraint, The World Bank Research Observer, 5(2), 127-142. doi. 10.1093/wbro/5.2.127

Flowerdew, R., & Aitkin, M. (1982). A method of fitting the gravity model based of the poisson distribution, Journal of Regional Science, 22(2), 191-202. doi. 10.1111/j.1467-9787.1982.tb00744.x

Frankel, J.A. (1997). Regional Trading Blocs in the World Economic System, Institute for International Economics, Washington, D.C.

Freedom House, (2009). Freedom in the World, 2008 Edition. Access: 24.09.09. [Retrieved from].

Freund, C.L., & Spatafora, N. (2008). Remittances, transaction costs, and informality, Journal of Development Economics, 86(2), 356-366. doi. 10.1016/j.jdeveco.2007.09.002

Gelos, G.R., Sahai, R., & Sandleris, G. (2004). Sovereign borrowing by developing countries: What determines market access?, IMF Working Paper, No.04/221. Access. 22.09.09. [Retrieved from].

Greene, W.H. (2002). Econometric Analysis, 5th edn, Prentice Hall, Upper Saddle River, NJ.

Gujarati, D.N. (2003). Basic Econometrics, 4th edition, McGraw Hill, New York, NY.

Gupta, S., Clements, B., Pivovarsky, A., & Tiongson, E.R. (2004). Foreign aid and revenue response: Does the composition of aid matter?, in S. Gupta, B. Clemens & G. Inchauste, (Eds), Helping Countries Develop: The Role of Fiscal Policy' International Monetary Fund, Washington, D.C. Access: 25.08.09. [Retrieved from].

Heckman, J. (1976). The common structure of statistical models of truncation, sample selection and limited dependent variables and a simple estimator for such models, Annals of Economic and Social Measurement, 5(4), 475-492.

Heller, P.S. (1975). A model of public fiscal behavior in developing countries: Aid, investment, and taxation, The American Economic Review, 65(3), 429-445.

Hirschman, C., Kasinitz, P., & DeWind, J. (1999). The handbook of international migration: The American experience, Russel Sage Foundation, New York. Jewish Agency for Israel (2009), `Population tables'. Access: 14.10.2009. [Retrieved from].

Kaufmann, D., Kraay, A., & Mastruzzi, M. (2008). Governance Matters VII: Aggregate and Individual Governance Indicators 1996-2007', World Bank Policy Research Working Paper (4654). Access: 24.09.09. [Retrieved from].

Keele, L., & Boef, S.D. (2004). Not just for cointegration: Error correction models with stationary data. Mimeo. Access: 24.10.2009. [Retrieved from].

Ketkar, S., & Ratha, D. (2009a). Development via diaspora bonds, in S. Ketkar & D. Ratha, (Eds), Innovative Financing for Development, The World Bank, Washington, D.C.

Ketkar, S., & Ratha, D. (2009b), Innovative Financing for Development, The World Bank, Washington, D.C.

Ketkar, S., & Ratha, D. (2010). Diaspora Bonds: Tapping the Diaspora During Difficult Times. World Bank.

Krugman, P. (1979). A model of balance-of-payments crises, Journal of Money, Credit and Banking, 11(3), 311-325. doi. 10.2307/1991793

Lane, P. (2004). Empirical perspectives on long-term external debt, Topics in Macroeconomics, 4(1), 1-23. doi. 10.2202/1534-5998.1152

Mavrotas, G., & Ouattara, B. (2003). Aid disaggregation, endogenous aid and the public sector in aid-recipient economies: Evidence from Côte d'Ivoire, UNU Wider Discussion Paper, No.2003/15. Access: 25.08.09. [Retrieved from].

McGillivray, M., & Morrissey, O. (2001). Fiscal effects of aid, UNU WIDER Discussion Paper, No.2001/61. Access: 25.08.09. [Retrieved from].

Menjivar, C., DaVanzo, J., Greenwell, L., & Valdez, R.B. (1998). Remittance behavior among Salvadoran and Filipino immigrants in Los Angeles, International Migration Review, 32(1), 97-126.

Michaelowa, K. (2003). The political economy of the enhanced HIPC-initiative, Public Choice, 114(3), 461-476. doi. 10.1023/A:1022695708053

Morse, A., & Shive, S. (2006). Patriotism in your portfolio. Mimeo. Access: 21.09.09. [Retrieved from].

Nielsen, T.M., & Riddle, L. (2007). Why diasporas invest in the homeland: A conceptual model of motivation. Mimeo. Access: 21.09.09. [Retrieved from].

Nowak-Lehmann, D., Martínez-Zarzoso, I., Klasen, S. & Herzer, D. (2009). Aid and trade - a donor's perspective, Journal of Development Studies, 45(7), 1184-1202. doi. 10.1080/00220380902952407

Osei, R., Morrissey, O., & Lloyd, T. (2005). The fiscal effects of aid in Ghana, Journal of International Development, 17(8), 1037-1053. doi. 10.1002/jid.1258

Ouattara, B. (2006). Foreign aid and government fiscal behaviour in developing countries: Panel data evidence, Economic Modelling, 23(3), 506-514. doi. 10.1016/j.econmod.2006.02.001

Panizza, U. (2008). Domestic and external public debt in developing countries, UNCTAD Discussion Paper, No.188. Access: 03.09.09. [Retrieved from].

Picht, H., & Stüven, V. (1991). Expropriation of foreign direct investments: Empirical evidence and implications for the debt crisis, Public Choice, 69(1), 19-38. doi. 10.1007/BF00123852

Ratha, D. (2010a). Diaspora bonds for development financing during a crisis. Peoplemove blog. [Retrieved from].

Ratha, D. (2010b), Mobilize the Diaspora for the Reconstruction of Haiti, SSRC Features: Haiti, Now and Next [Retrieved from].

Ratha, D., De, P., & Mohapatra, S. (2009), Shadow sovereign ratings for unrated developing countries, in S. Ketkar & D. Ratha, (Eds), Innovative Financing for Development, The World Bank, Washington, D.C.

Rehavi, Y., & Weingarten, A. (2004). Fifty years of external finance via state of Israel non-negotiable bonds, Bank of Israel Working Paper. Access: 17.08.09. [Retrieved from].

Santos Silva, J. & Tenreyro, S. (2006). The log of gravity, The Review of Economics and Statistics, 88(4), 641-658. doi. 10.1162/rest.88.4.641

Standard & Poor's (2007). Sovereign ratings history since 1975. Access: 28.09.09. [Retrieved from].

Van Hear, N. (1998). New Diasporas, UCL Press, London.

Vargas-Silva, C., & Huang, P. (2006). Macroeconomic determinants of workers' remittances: Host versus home country's economic conditions, Journal of International Trade & Economic Development, 15(1), 81-99.

Vasishtha, G. (2007). Domestic versus external borrowing and fiscal policy in emerging markets, Bank of Canada Working Paper, No.2007-33. Access: 17.09.09. [Retrieved from].

Weitzenegger, K. (2008). Entwicklungspolitik für, mit und durch MigrantInnen: Wie geht das? Paper presented at: Tagung Migration(en) und Entwicklung(en) Transformation von Paradigmen, Organisationen und Geschlechterordnungen Bielefeld, 10.-11. Juli 2008, Access: 26.10.2009. [Retrieved from].

Wooldridge, J.M. (2002). Econometric Analysis of Cross-Section and Panel Data, MIT Press, Cambridge, MA and London.

World Bank, (2006). Global Economic Prospects 2006; Economic Implications of Remittances and Migration, Washington, D.C. Access: 29.08.09. [Retrieved from].

World Bank (2007). World Development Indicators 2007, Washington, D.C. CD-Rom.

Yang, D. (2007). Coping with disaster: The impact of hurricanes on international financial flows, 1970-2002, The B.E. Journal of Economic Analysis & Policy, 8(1), 1-45. doi. 10.2202/1935-1682.1903

Yang, D., & Choi, H. (2007). Are remittances insurance? Evidence from rainfall shocks in the Philippines, The World Bank Economic Review, 21(2), 219-248. doi. 10.1093/wber/lhm003




DOI: http://dx.doi.org/10.1453/jepe.v5i1.1566

Refbacks

  • There are currently no refbacks.




.......................................................................................................................................................................................................................................................................................................................................

Journal of Economics and Political Economy - J. Econ. Pol. Econ. - JEPE - www.kspjournals.org

ISSN: 2148-8347. Editor : editor-jepe@kspjournals.org   Secretarial: secretarial@kspjournals.org   Istanbul - Turkey.

Copyright © KSP Journals