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Determinants of Spread and Creditworthiness for Emerging Market Sovereign Debt:A Panel Data Study

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Peter Rowland ()
José Luis Torres ()

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Abstract

This study uses a panel-data framework to identify the determinants of the spread over US Treasuries of emerging market sovereign issues as well as of the creditworthiness of the issuers,where the latter is represented by the Institutional Investor's creditworthiness index. We use a sample of 16 emerging market economies, together with time series data for the period 1998 to 2002 when analysing the spread, and from 1987 to 2001 when analysing the creditworthiness. The results suggest that for both the spread and the creditworthiness, significant explanatory variables include the economic growt rate, the debt-to-GDP ratio, the reserves-to-GDP ratio, and the debt-to-exports ratio. In addition, the spread is also determined by the exports-to-GDP ratio, and the debt service to GDP,while the creditworthiness is influenced by the inflation rate and a default dummy variable.

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 295.

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Handle: RePEc:bdr:borrec:295

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  4. Xavier Sala-i-Martin, 1997. "I just Ran Four Million Regressions," Economics Working Papers 201, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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  5. Barry Eichengreen & Ashoka Mody, 1998. "What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?," NBER Working Papers 6408, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. 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. [Downloadable!]
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  1. Elena Loukoianova & Cheng Hoon Lim & Samuel Malone & Dale F. Gray, 2008. "A Risk-Based Debt Sustainability Framework: Incorporating Balance Sheets and Uncertainty," IMF Working Papers 08/40, International Monetary Fund. [Downloadable!]
  2. Martín Grandes, 2007. "The Determinants of Sovereign Bond Spreads: Theory and Facts From Latin America," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 44(130), pages 151-181. [Downloadable!]
  3. Peter Rowland, 2005. "Buyback Of Colombian Sovereign Debt," BORRADORES DE ECONOMIA 002073, BANCO DE LA REPÚBLICA. [Downloadable!]
  4. Ratha, Dilip & De, Prabal & Mohapatra, Sanket, 2007. "Shadow sovereign ratings for unrated developing countries," Policy Research Working Paper Series 4269, The World Bank. [Downloadable!]
  5. Peter Rowland, . "Buyback of Colombian Sovereign Debt," Borradores de Economia 331, Banco de la Republica de Colombia. [Downloadable!]
  6. Amine Mati & Emanuele Baldacci & Sanjeev Gupta, 2008. "Is it (Still) Mostly Fiscal? Determinants of Sovereign Spreads in Emerging Markets," IMF Working Papers 08/259, International Monetary Fund. [Downloadable!]
  7. Peter Rowland, 2004. "Determinants Of Spread , Credit Rating And Creditworthiness For Emerging Market Sovereign Debt: A Panel Data Study," BORRADORES DE ECONOMIA 002336, BANCO DE LA REPÚBLICA. [Downloadable!]
  8. Peter Rowland, . "Determinants of Spread and Credit Ratings and Creditworthiness for Emerging Market Sovereign Debt: A Follow-Up Study Using Pooled Data Analysis," Borradores de Economia 296, Banco de la Republica de Colombia. [Downloadable!]
  9. Daniel Leigh, 2008. "Achieving a Soft Landing: The Role of Fiscal Policy," IMF Working Papers 08/69, International Monetary Fund. [Downloadable!]
  10. Peter Rowland, 2004. "The Colombian Sovereign Spread And Its Determinants," BORRADORES DE ECONOMIA 003572, BANCO DE LA REPÚBLICA. [Downloadable!]
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