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Global monetary conditions versus country-specific factors in the determination of emerging market debt spreads

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  • Dailami, Mansoor
  • Masson, Paul R.
  • Padou, Jean Jose

Abstract

US interest rate policy is shown to have a significant influence on emerging market bond spreads, but it is important to allow for non-linearities: US interest rates affect secondary market spreads differently, depending on countries' debt levels. Moderate debtors suffer little impact from an increase in US interest rates, while a country close to the borderline of solvency would face a much steeper increase in its spread. A 200 basis points increase in US short-term interest rates would increase emerging market spreads by 6-65Â bps, depending on debt/GNI ratios.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 27 (2008)
Issue (Month): 8 (December)
Pages: 1325-1336

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Handle: RePEc:eee:jimfin:v:27:y:2008:i:8:p:1325-1336

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Web page: http://www.elsevier.com/locate/inca/30443

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Keywords: Emerging markets Interest rate spreads US monetary policy;

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