DP7347 The End of Gatekeeping: Underwriters and the Quality of Sovereign Bond Markets, 1815-2007

Author(s): Marc Flandreau , Juan Huitzilihuitl Flores Zendejas , Norbert Gaillard , Sebastián Nieto-Parra

Publication Date: June 2009

Keyword(s): banks competition , certification , primary bond market , sovereign debt crises

JEL(s): F34 , G14 , G24 , N2

Programme Areas: International Macroeconomics

Link to this Page: www.cepr.org/pubs/dps/DP7347.asp.asp

We provide a comparison of salient organizational features of primary markets for foreign government debt over the very long run. We focus on output, quality control, information provision, competition, pricing, charging and signaling. We find that the market set up experienced a radical transformation in the recent period and interpret this as resulting from the rise of liability insurance provided by rating agencies. Underwriters have given up their former role as gatekeepers of liquidity and certification agencies to become aggressive competitors in a new speculative grade market.