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Spatial Spillovers in Emerging Market Spreads

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  • Salvatore Dell'Erba
  • Emanuele Baldacci
  • Tigran Poghosyan

Abstract

We use novel spatial econometrics techniques to explore spillovers in the sovereign bond market for 24 emerging economies during 1995-2010. The paper extends the previous literature focusing on spillover effects from advanced to emerging economies by analyzing transmission of shocks across emerging markets. After controlling for the impact of global factors, we find strong evidence of spillovers from both sovereign spreads and macroeconomic fundamentals in neighboring emerging economies. In addition to the geographical proximity, the channels of spatial transmission include trade and financial linkages. The results of the paper highlight the importance of accounting not only for spillovers from advanced economies to emerging markets, but also across emerging markets when analyzing sovereign spreads.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/221.

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Length: 28
Date of creation: 01 Sep 2011
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Handle: RePEc:imf:imfwpa:11/221

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Keywords: Spillovers; Bonds; Developed countries; Economic models; External debt; Global Financial Crisis 2008-2009; Sovereign debt; bond; currency crises; sovereign bond; total external debt; portfolio investment; debt ratio; financial markets; global liquidity; bond spreads; public debt; public external debt; currency crisis; local debt; current account; bond market; treasury bond; sovereign debt crises; eurobonds; current account adjustment; partial derivative; brady bonds; private debt; bond markets; cash flows; financial contagion; market debt; stock market; debt crises; local currency bond markets; financial sector; emerging market bond; derivative; sovereign bond market; bond yields; local currency bond; market bond; sovereign default; debt outstanding; international finance;

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References

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Cited by:
  1. Fidrmuc, Jarko & Korhonen, Iikka & Bátorová, Ivana, 2008. "China in the world economy: Dynamic correlation analysis of business cycles," BOFIT Discussion Papers 7/2008, Bank of Finland, Institute for Economies in Transition.
  2. Lena Tonzer, 2013. "Cross-Border Interbank Networks, Banking Risk and Contagion," FIW Working Paper series 129, FIW.
  3. Nazim Belhocine & Salvatore Dell'Erba, 2013. "The Impact of Debt Sustainability and the Level of Debt on Emerging Markets Spreads," IMF Working Papers 13/93, International Monetary Fund.

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