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Luiza Antoun de Almeida and Ms. Diva Singh
In recent years, we have observed an increase in low-income countries’ (LICs) access to international capital markets, especially after the Global Financial Crisis (GFC). This paper investigates what factors—country-specific macroeconomic fundamentals and/or external variables—have contributed to the surge in external bond issuance by these LICs, which we refer to in our paper as ‘frontier economies’. Using data on public and publicly guaranteed (PPG) external bond issuance, outstanding PPG bond stock, as well as sovereign spreads, we employ panel data analysis to examine factors related to the increase in issuance by these economies as well as the reduction in their spreads over time. Our empirical study shows that both country-specific fundamentals (such as public debt, current account balance, level of reserves, quality of institutions) and external variables (such as US growth and the VIX index) play a role in explaining the increased amount of issuance and the decline in spreads of frontier economies’ sovereign bonds. The impact of some of these variables on issuance appears to reflect a country’s need to issue bonds for external financing (‘the supply side’ of bond issuance), while others appear to correlate more through their impact on investors’ appetite for a country’s debt (‘the demand side’). In addition, the impact of country-specific variables can also be affected by external factors such as global risk appetite. Our analysis of key factors that have contributed to increased market access for frontier economies over the past decade provides important information to gauge the prospects for their continued market access, and for other LICs to join this group by tapping international markets for the first time.
Luiza Antoun de Almeida and Ms. Diva Singh

Pull Factors 4. PPG bonds to GDP regressions 5. Probability of Issuance regressions – Non-Linear Marginal Effects 6. Probability of Issuance regressions.- LPM 7. EMBIG regressions 8. Factors Affecting Market Access in EE vs Frontier Economies 9. Summary Statistics Figures 1. Outstanding PPG Bond Stock in Frontier Economies – 1990 to 2019 2. Frequency of PPG Issuance by Frontier Economies 3. Outstanding PPG Bond Stock vs VIX – 2009 to 2019 4. EMBIG spreads evolution in Frontier Economies 5. Number of issuances by year and country 6

Luiza Antoun de Almeida and Ms. Diva Singh

Poor Countries (HIPC) debt relief initiative (launched in 1996) under which they were precluded from issuing market debt until they reached the completion point of the process. By 2009, all but two HIPC countries in our sample had already reached the HIPC completion point. 9 Figure 2. Frequency of PPG Issuance by Frontier Economies Source: World Bank. Author’s elaboration. The increase in frontier economies’ outstanding PPG bond stock from 2009 also coincided with a decrease in global financial market volatility. Figure 3 shows the evolution of the