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The Determinants of Sovereign Bond Spreads: Theory and Facts From Latin America

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  • Martín Grandes
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    Abstract

    This paper aims to identify the macroeconomic determinants of sovereign bond spreads in Argentina, Brazil and Mexico and discusses the economic policies underlying the divergent fortunes experienced by these countries over 1993-2001. Those determinants, n

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    File URL: http://www.economia.puc.cl/docs/130grana.pdf
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    Bibliographic Info

    Article provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its journal Cuadernos de Economía-Latin American Journal of Economics.

    Volume (Year): 44 (2007)
    Issue (Month): 130 ()
    Pages: 151-181

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    Handle: RePEc:ioe:cuadec:v:44:y:2007:i:130:p:151-181

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    Related research

    Keywords: Sovereign debt; default risk; contagion; Latin America; emerging markets;

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    References

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    1. Selmo Aronovich, 1999. "Country Risk Premium: Theoretical Determinants and Empirical Evidence for Latin American Countries," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 53(4), pages 463-498, October.
    2. Diaz Weigel, Diana & Gemmill, Gordon, 2006. "What drives credit risk in emerging markets? The roles of country fundamentals and market co-movements," Journal of International Money and Finance, Elsevier, vol. 25(3), pages 476-502, April.
    3. Gergana Jostova, 2006. "Predictability in Emerging Sovereign Debt Markets," The Journal of Business, University of Chicago Press, vol. 79(2), pages 527-566, March.
    4. Julio Nogués & Martín Grandes, 2001. "COUNTRY RISK: Economic Policy, Contagion Effect or Political noise?," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 125-162, May.
    5. Barry Eichengreen & Ashoka Mody, 2000. "What Explains Changing Spreads on Emerging Market Debt?," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 107-134 National Bureau of Economic Research, Inc.
    6. Alicia Garcia Herrero & Alvaro Ortiz, 2005. "The Role Of Global Risk Aversion In Explaining Latin American Sovereign Spreads," International Finance 0503005, EconWPA.
    7. Bernoth, Kerstin & Schuknecht, Ludger & von Hagen, Jürgen, 2004. "Sovereign Risk Premia in the European Bond Market," CEPR Discussion Papers 4465, C.E.P.R. Discussion Papers.
    8. Hildegart A. Ahumada & Maria Lorena Garegnani, 2005. "Testing the Exogeneity of Argentine Devaluation and Default Risks in Retrospect," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(5), pages 647-672, October.
    9. Ian Domowitz & Jack Glen & Ananth Madhavan, . "Country and Currency Risk Premia in an Emerging Market," IPR working papers 97-26, Institute for Policy Resarch at Northwestern University.
    10. Peter Rowland & José Luis Torres, . "Determinants of Spread and Creditworthiness for Emerging Market Sovereign Debt:A Panel Data Study," Borradores de Economia 295, Banco de la Republica de Colombia.
    11. Martín González-Rozada & EduardoLevy Yeyati, 2008. "Global Factors and Emerging Market Spreads," Economic Journal, Royal Economic Society, vol. 118(533), pages 1917-1936, November.
    12. Reisen, Helmut & von Maltzan, Julia, 1999. "Boom and Bust and Sovereign Ratings," International Finance, Wiley Blackwell, vol. 2(2), pages 273-93, July.
    13. Frankel, Jeffrey & Schmukler, Sergio & Serven, Luis, 2000. "Global transmission of interest rates : monetary independence and the currency regime," Policy Research Working Paper Series 2424, The World Bank.
    14. Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 37-53.
    15. International Monetary Fund, 1998. "The Relative Importance of Political and Economic Variables in Creditworthiness Ratings," IMF Working Papers 98/46, International Monetary Fund.
    16. Feder, Gershon & Just, Richard E., 1977. "A study of debt servicing capacity applying logit analysis," Journal of Development Economics, Elsevier, vol. 4(1), pages 25-38, February.
    17. Thomas Philippon & Jeromin Zettelmeyer & Eduardo Borensztein, 2001. "Monetary Independence in Emerging Markets: Does the Exchange Rate Regime Make a Difference?," IMF Working Papers 01/1, International Monetary Fund.
    18. Vivek B. Arora & Martin D. Cerisola, 2000. "How Does U.S. Monetary Policy Influence Economic Conditions in Emerging Markets?," IMF Working Papers 00/148, International Monetary Fund.
    19. José Wong, 2000. "Are changes in spreads of external-market debt also induced by contagion?," Intereconomics: Review of European Economic Policy, Springer, vol. 35(2), pages 72-80, March.
    20. Eli M Remolona & Michela Scatigna & Eliza Wu, 2007. "Interpreting sovereign spreads," BIS Quarterly Review, Bank for International Settlements, March.
    21. Taimur Baig & Ilan Goldfajn, 2000. "The Russian Default and the Contagion to Brazil," IMF Working Papers 00/160, International Monetary Fund.
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    Citations

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    Cited by:
    1. Heather D. Gibson & Stephan G. Hall & George S. Tavlas, 2011. "The Greek financial crisis: growing imbalances and sovereign spreads," Working Papers 124, Bank of Greece.
    2. Martinez, Lisana B. & Terceño, Antonio & Teruel, Mercedes, 2013. "Sovereign bond spreads determinants in Latin American countries: Before and during the XXI financial crisis," Emerging Markets Review, Elsevier, vol. 17(C), pages 60-75.
    3. Alex Luiz Ferreira., 2009. "Is it Risk? An Automated Approach to Explain the ex ante UIP Deviations of Brazil," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 46(133), pages 51-66.
    4. Eduardo Levy-Yeyati & Tomás Williams, 2010. "US Rates and Emerging Markets Spreads," Business School Working Papers 2010-02, Universidad Torcuato Di Tella.
    5. Martin Grandes & Marcel Peter & Nicolas Pinaud, 2010. "Pricing the Currency Premium Under Flexible Exchange Rates: Evidence from South Africa," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(60), pages 7-52, October -.

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