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Impact of IMF-related news on capital markets: Further evidence from bond spreads in Indonesia and Korea

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  • Evrensel, Ayse Y.
  • Kutan, Ali M.

Abstract

The IMF's effects on private capital markets have attracted increasing attention in the literature. This paper examines whether IMF-related news during the Asian crisis contains information regarding the changes in sovereign bond spreads of Indonesia and Korea. Our results indicate that other countries' IMF-related news increases these countries' bond spreads. Both in Indonesia and Korea, the countries' own news associated with program negotiations and approval decreases bond spreads. With respect to the interpretations of the impact of IMF news on private capital markets, we show that the current interpretations vary and identify this issue as an important future research agenda.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 18 (2008)
Issue (Month): 2 (April)
Pages: 147-160

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Handle: RePEc:eee:intfin:v:18:y:2008:i:2:p:147-160

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Web page: http://www.elsevier.com/locate/intfin

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References

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  1. Barry Eichengreen, 2005. "The IMF in a World of Private Capital Markets," Working Papers id:48, eSocialSciences.
  2. Kanokwan Chancharoenchai & Sel Diboog�Lu & Ike Mathur, 2005. "Stock Returns and the Macroeconomic Environment Prior to the Asian Crisis in Selected Southeast Asian Countries," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 41(4), pages 38-56, August.
  3. Sander, Harald & Kleimeier, Stefanie, 2003. "Contagion and causality: an empirical investigation of four Asian crisis episodes," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 13(2), pages 171-186, April.
  4. Ali Kutan & Brasukra Sudjana, 2003. "Investor reaction to IMF actions in the indonesian financial crisis," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(3), pages 181-190.
  5. Beck, T.H.L. & Demirgüç-Kunt, A. & Levine, R., 2000. "A new database on financial development and structure," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125518, Tilburg University.
  6. Longstaff, Francis A & Schwartz, Eduardo S, 1995. " A Simple Approach to Valuing Risky Fixed and Floating Rate Debt," Journal of Finance, American Finance Association, vol. 50(3), pages 789-819, July.
  7. Kanokwan Chancharoenchai & Sel Dibooglu, 2006. "Volatility Spillovers and Contagion During the Asian Crisis: Evidence from Six Southeast Asian Stock Markets," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 42(2), pages 4-17, April.
  8. Ender Su & Thomas W. Knowles, 2006. "Asian Pacific Stock Market Volatility Modeling and Value at Risk Analysis," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 42(2), pages 18-62, April.
  9. Hayo, Bernd & Kutan, Ali M., 2005. "IMF-related news and emerging financial markets," Journal of International Money and Finance, Elsevier, vol. 24(7), pages 1126-1142, November.
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Cited by:
  1. Kutan, Ali M. & Muradoglu, Gulnur & Sudjana, Brasukra G., 2012. "IMF programs, financial and real sector performance, and the Asian crisis," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 164-182.
  2. Evrensel, Ayse & Kutan, Ali M., 2008. "How do IMF announcements affect financial markets in crises?: Evidence from forward exchange markets," Journal of Financial Stability, Elsevier, vol. 4(2), pages 121-134, June.

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