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The Relevance of Currency Mismatch Indicators: an Analysis Through Determinants of Emerging Market Spreads

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  • Stephanie Prat
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    Abstract

    We study the impact of currency mismatches on changes in emerging sovereign bond spreads using new currency mismatch indicators, both at the aggregate level and for the banking sector, for 25 emerging countries. We use first a panel data estimation of EMBI secondary market spreads and a set of standard variables related to debt sustainability to construct a basic model of determinants of emerging sovereign spreads. Then we include our currency mismatch indicators to test their relevance in emerging spread determination. We find these indicators play a significant role for the determination of emerging sovereign bond spreads. Finally, we can conclude that these indicators should be considered more consistently in analyses of emerging market vulnerabilities.

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    Bibliographic Info

    Article provided by CEPII research center in its journal Economie Internationale.

    Volume (Year): (2007)
    Issue (Month): 111 ()
    Pages: 101-122

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    Handle: RePEc:cii:cepiei:2007-3te

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    Related research

    Keywords: Currency mismatches; emerging markets; sovereign spreads; financial markets; international lending;

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    Cited by:
    1. Rudiger Ahrend & Antoine Goujard, 2012. "International Capital Mobility and Financial Fragility - Part 1. Drivers of Systemic Banking Crises: The Role of Bank-Balance-Sheet Contagion and Financial Account Structure," OECD Economics Department Working Papers 902, OECD Publishing.
    2. Brana, Sophie & Lahet, Delphine, 2010. "Determinants of capital inflows into Asia: The relevance of contagion effects as push factors," Emerging Markets Review, Elsevier, vol. 11(3), pages 273-284, September.
    3. Ivanka Petkova, 2011. "Effects of Different Currencies and Exchange Rate Regimes in Post-Yugoslav Countries during the Global Financial and Economic Crisis," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 148-160.

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