Emerging Countries' Sovereign Risk. Balance Sheets, Contagion and Risk Aversion
AbstractThree important external determinants of sovereign spreads in emerging countries are reviewed: balance sheet effects, global risk aversion and contagion. While there are ways to reduce the detrimental impact of balance sheet effects, these are either hard to implement or costly. Insurance against them would need to be considered either in the form of self insurance (accumulation of reserves) or market insurance (instruments which are inversely related to a countryâ€™s real exchange rate). In addition, the cost of self insurance might be too high and private insurance not easily available because of shallow markets. This is why regional insurance has an important role to play.
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Bibliographic InfoPaper provided by BBVA Bank, Economic Research Department in its series Working Papers with number 0501.
Date of creation: Jun 2005
Date of revision:
Balance Sheets; Contagion; Risk Aversion;
Find related papers by JEL classification:
- F0 - International Economics - - General
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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