Dollarization and the relationship between EMBI and fundamentals in Latin American countries
AbstractThis paper presents empirical evidence on the interrelationship that exists between the evolution of the Emerging Markets Bonds Index (EMBI) and some macroeconomic variables in seven Latin American countries; two of them (Ecuador and Panama), full dollarized. We make use of a Cointegrated Vector framework to analyze the short run effects from 2001 to 2009. The results suggest that EMBI is more stable in dollarized countries and that its evolution influences economic activity in non-dollarized economies; suggesting that investors confidence might be higher in dollarized countries where real and financial economic evolution are less tied than in non-dollarized ones.
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Bibliographic InfoPaper provided by Universitat de Barcelona, UB Riskcenter in its series Working Papers with number 2014-02.
Length: 35 pages
Date of creation: Feb 2014
Date of revision:
Dollarization; emerging markets; Latin American countries; Cointegrated VAR; EMBI; exchange rate regime;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-04-29 (All new papers)
- NEP-LAM-2014-04-29 (Central & South America)
- NEP-MAC-2014-04-29 (Macroeconomics)
- NEP-MON-2014-04-29 (Monetary Economics)
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