Overcoming original sin: Shedding new light on uneven progress.

This article analyzes sovereign bond markets to assess the phenomenon of "Original Sin," defined as a country's inability to borrow abroad in its own currency. Using a newly constructed dataset covering 27 major emerging market economies (EMEs) from 2004 to 2022, the study finds that many major EMEs have made progress in issuing more government bonds in local currency (LC) and attracting foreign participation in these LC bond markets, thereby reducing reliance on foreign currency (FC) debt. However, progress has been uneven and slow, with institutional development and country-specific factors playing key roles alongside global financial conditions. The article also highlights a shift in currency risk from borrowers to foreign investors—termed "original sin redux"—whereby foreign investors’ increased exposure to EME currencies introduces new vulnerabilities related to exchange rate fluctuations and capital flow volatility.