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Bond Yields in Emerging Economies

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Author Info

  • Laura Jaramillo
  • Anke Weber

Abstract

While many studies have looked into the determinants of yields on externally issued sovereign bonds of emerging economies, analysis of domestically issued bonds has hitherto been limited, despite their growing relevance. This paper finds that the extent to which fiscal variables affect domestic bond yields in emerging economies depends on the level of global risk aversion. During tranquil times in global markets, fiscal variables do not seem to be a significant determinant of domestic bond yields in emerging economies. However, when market participants are on edge, they pay greater attention to country-specific fiscal fundamentals, revealing greater alertness about default risk.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/198.

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Length: 25
Date of creation: 01 Aug 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/198

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Keywords: Public debt; Bonds; Economic models; bond; bond yields; domestic bond; bond markets; bond yield; term bond; stock market; financial markets; stock market index; domestic bond markets; sovereign bonds; sovereign bond; long-term bond yields; bond fund; international financial statistics; money market; foreign bond; bond funds; local currency bond; international capital; local currency bond markets; money market rate; government bonds; long-term bond yield; financial stability; long term bond; stock market indices; financial repression; government bonds net wealth; bond spread; international financial markets; flexible exchange rates; local stock market; international capital mobility; corporate bonds; nominal interest rate; sovereign bond markets; financial sector; emerging market bond; bond rate; domestic interest rates; bond spreads; market bond; financial system; development of bond markets; bondholders; financial economics; equity market;

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References

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  1. Francesco Audrino & Enrico De Giorgi, 0. "Beta Regimes for the Yield Curve," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 5(3), pages 456-490.
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  3. Peter Rowland & José Luis Torres, . "Determinants of Spread and Creditworthiness for Emerging Market Sovereign Debt:A Panel Data Study," Borradores de Economia 295, Banco de la Republica de Colombia.
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  8. Huang, Ho-Chuan, 2001. "Tests of CAPM with Nonstationary Beta," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 255-68, July.
  9. António Afonso & João Tovar Jalles, 2011. "Growth and Productivity: the role of Government Debt," Working Papers Department of Economics 2011/13, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  10. R. D. Brooks & R. W. Faff & M. McKenzie, 2002. "Time varying country risk: an assessment of alternative modelling techniques," The European Journal of Finance, Taylor & Francis Journals, vol. 8(3), pages 249-274.
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  12. Miguel A. Segoviano Basurto & Carlos Caceres & Vincenzo Guzzo, 2010. "Sovereign Spreads," IMF Working Papers 10/120, International Monetary Fund.
  13. Sebastian Edwards, 1983. "LDC's Foreign Borrowing and Default Risk: An Empirical Investigation," NBER Working Papers 1172, National Bureau of Economic Research, Inc.
  14. Shyh-Wei Chen & Nai-Chuan Huang, 2007. "Estimates of the ICAPM with regime-switching betas: evidence from four pacific rim economies," Applied Financial Economics, Taylor & Francis Journals, vol. 17(4), pages 313-327.
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Citations

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Cited by:
  1. Stracca, Livio, 2013. "The global effects of the euro debt crisis," Working Paper Series 1573, European Central Bank.
  2. Laura Jaramillo & Yuanyan Sophia Zhang, 2013. "Real Money Investors and Sovereign Bond Yields," IMF Working Papers 13/254, International Monetary Fund.
  3. Essers, Dennis & Cassimon, Danny, 2012. "Washing away original sin: vulnerability to crisis and the role of local currency bonds in Sub-Saharan Africa," IOB Working Papers 2012.12, Universiteit Antwerpen, Institute of Development Policy and Management (IOB).

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