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The Determinants of Sovereign Spreads in Emerging Markets

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  • Olcay Yucel Culha
  • Fatih Ozatay
  • Gulbin Sahinbeyoglu

Abstract

This study analyzes both short-run and long-run determinants of the sovereign spreads in a set of 21 emerging countries over the period 1998-2004 utilizing both daily and monthly data and estimate individual country and panel regressions. Our analysis shows that both domestic and international factors affect spreads, where the most important common determinant of the spreads is found to be the risk appetite of foreign investors. By using an event study methodology we find no evidence of impact of the FOMC announcements on spreads. Finally, we analyze whether news regarding domestic politics and announcements of international organizations play a role in the evolution of spreads. Using the postcrisis data of Turkey, we point out an important effect of such news releases.

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Bibliographic Info

Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 0604.

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Date of creation: 2006
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Handle: RePEc:tcb:wpaper:0604

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Keywords: Bond spreads; emerging markets; Fed announcements; political news;

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Cited by:
  1. Goknur Umutlu & Yilmaz Yildız, 2011. "The Effect of Global Liquidity on Macroeconomic Parameters," Asian Economic and Financial Review, Asian Economic and Social Society, Asian Economic and Social Society, vol. 1(3), pages 167-181, September.
  2. Ciarlone, Alessio & Piselli, Paolo & Trebeschi, Giorgio, 2009. "Emerging markets' spreads and global financial conditions," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 19(2), pages 222-239, April.
  3. Fatih Ozatay, 2008. "Expansionary Fiscal Consolidations: New Evidence from Turkey," Working Papers, Economic Research Forum 406, Economic Research Forum, revised May 2008.

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