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Characterizing Global Investors' Risk Appetite for Emerging Market Debt During Financial Crises

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Author Info

  • Brenda González-Hermosillo
  • Vance Martin
  • Mardi Dungey
  • Renee Fry

Abstract

The effects of unanticipated movements in global risk on nine emerging bond markets are investigated. The components of global risk are volatility, credit, and liquidity risks. Country and contagion risks are also studied individually. A historical decomposition of bond spreads is used to identify the relative contributions of risk during 1998-99. The empirical results show that the Russian/LTCM crises were characterized by increases in global credit risk, while the relative size of global risk factors was mixed for the Brazilian crisis, with no component dominating. Country risk is found to be important for all countries, while there is little evidence of contagion risk.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/251.

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Length: 44
Date of creation: 01 Dec 2003
Date of revision:
Handle: RePEc:imf:imfwpa:03/251

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Related research

Keywords: Emerging markets; Bonds; Financial risk; Economic models; bond; bond spreads; bond markets; statistics; financial markets; bond spread; descriptive statistics; covariance; market bond; emerging market bond; financial system; national bond; national bond markets; treasury bond; financial stability; kurtosis; skewness; bond default; international bond; bond market; statistic; emerging bond markets; international bond markets; equity markets; currency crises; vector autoregression; sovereign bond; standard deviation; financial contagion; international capital; hedge fund; forecasting; yankee bond; hedge; financial market; empirical estimation; international financial markets; sovereign bonds; brady bond; logarithm; corporate bond; stock market; bond yield; correlation; polynomial; equation; government bonds; number of variables; stock market prices; international capital markets; high-yield bond; eurobond; data analysis; emerging bond market; corporate bonds; empirical model; financial economics; covariances; investment grade corporate bonds; treasury bonds; bond index; time series; econometrics; brady bonds; cumulative distribution function; random error; optimization; equations; missing observations; simultaneous equation; benchmark bonds; time series analysis; autocorrelation; deposit insurance;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Citations

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Cited by:
  1. Alicia Garcia Herrero & Alvaro Ortiz, 2005. "The Role Of Global Risk Aversion In Explaining Latin American Sovereign Spreads," International Finance 0503005, EconWPA.
  2. Banerji, Sanjay & Ventouri, Alexia & Wang, Zilong, 2014. "The sovereign spread in Asian emerging economies: The significance of external versus internal factors," Economic Modelling, Elsevier, vol. 36(C), pages 566-576.
  3. Philipp Maier & Garima Vasishtha, 2008. "Good Policies or Good Fortune: What Drives the Compression in Emerging Market Spreads?," Working Papers 08-25, Bank of Canada.
  4. Brenda González-Hermosillo, 2008. "Investors’ Risk Appetite and Global Financial Market Conditions," IMF Working Papers 08/85, International Monetary Fund.

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