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Bloodshed or Reforms? The Determinants of Sovereign Bond Spreads in 1870-1913 and Today

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Author Info
Mauro, Paolo
Sussman, Nathan
Yafeh, Yishay

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Abstract

Drawing on a newly-collected data set on bond yields, macroeconomic variables, and news of various categories for a panel of emerging markets, we provide the first comparative analysis of the determinants of sovereign bond spreads in the first era of financial globalization and bond finance (1870-1913) and today (1994-2002). We find that news about wars or episodes of politically-motivated violence are a significant and robust determinant of spreads; fiscal variables also play a role; in contrast, news about institutional reforms seldom have a rapid and significant impact. There are also important differences between the two eras: country-specific fundamentals account for a greater share of variation in spreads during the pre-WWI period than today.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5528.

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Date of creation: Mar 2006
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Handle: RePEc:cpr:ceprdp:5528

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Related research
Keywords: bond yields; emerging markets; financial globalization;

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Find related papers by JEL classification:
F34 - International Economics - - International Finance - - - International Lending and Debt Problems
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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  1. Paolo Mauro & Nathan Sussman & Yishay Yafeh, 2002. "Emerging Market Spreads: Then Versus Now," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 695-733, May. [Downloadable!] (restricted)
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  2. Michael D. Bordo & Hugh Rockoff, 1996. "The Gold Standard as a `Good Housekeeping Seal of Approval'," NBER Working Papers 5340, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December. [Downloadable!] (restricted)
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  4. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Daron Acemoglu, 2005. "Constitutions, Politics, and Economics: A Review Essay on Persson and Tabellini's The Economic Effects of Constitutions," Journal of Economic Literature, American Economic Association, vol. 43(4), pages 1025-1048, December. [Downloadable!] (restricted)
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  6. Flandreau, Marc & Sussman, Nathan, 2004. "Old Sins: Exchange Rate Clauses and European Foreign Lending in the 19th Century," CEPR Discussion Papers 4248, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  7. Hong G. Min, 1998. "Determinants of emerging market bond spread : do economic fundamentals matter?," Policy Research Working Paper Series 1899, The World Bank. [Downloadable!]
  8. Bordo, Michael D. & Rockoff, Hugh, 1996. "The Gold Standard as a ?Good Housekeeping Seal of Approval?," The Journal of Economic History, Cambridge University Press, vol. 56(02), pages 389-428, June. [Downloadable!]
  9. Sy, Amadou N. R., 2002. "Emerging market bond spreads and sovereign credit ratings: reconciling market views with economic fundamentals," Emerging Markets Review, Elsevier, vol. 3(4), pages 380-408, December. [Downloadable!] (restricted)
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