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Identification of Driving Factors for Emerging Markets Sovereign Spreads

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Author Info

  • Edward W. Sun

    ()
    (BEM Management School Bordeaux, France)

  • Daniel Tenengauzer

    ()
    (Bank of America Merrill Lynch New York, USA)

  • Ali Bastani

    ()
    (Bank of America Merrill Lynch New York, USA)

  • Omid Rezania

    ()
    (California Public Employees Retirement System Sacramento, USA)

Abstract

The objective of this paper is to identify the relationship between sovereign yield spreads and macroeconomic variables in emerging markets. We find that the correlation between spreads and GDP is negative. Real effective exchange rate depreciation enlarges spreads and increasing in risk aversion influences spreads. US treasury yields impact on spreads is changing over time. More recently lower US treasuries yields have driven spreads wider. Last commodity prices are associated with a reduction in emerging market debt spreads.

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File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I3-P232.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 31 (2011)
Issue (Month): 3 ()
Pages: 2584-2592

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Handle: RePEc:ebl:ecbull:eb-11-00543

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Related research

Keywords: Bond spread; Cointegration; Emerging market CDS; Sovereign bond;

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  1. Jens Hilscher & Yves Nosbusch, 2007. "Determinants of Sovereign Risk: Macroeconomic Fundamentals and the Pricing of Sovereign Debt," Money Macro and Finance (MMF) Research Group Conference 2006 114, Money Macro and Finance Research Group, revised 24 Apr 2007.
  2. Paolo Mauro & Nathan Sussman & Yishay Yafeh, 2002. "Emerging Market Spreads: Then Versus Now," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 695-733, May.
  3. Alicia Garcia-Herrero & Alvaro Ortiz, 2006. "The Role of Global Risk Aversion in Explaining Sovereign Spreads," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  4. Robert A. Jarrow & David Lando & Fan Yu, 2005. "Default Risk And Diversification: Theory And Empirical Implications," Mathematical Finance, Wiley Blackwell, vol. 15(1), pages 1-26.
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