The Role Of Global Risk Aversion In Explaining Latin American Sovereign Spreads
AbstractThis paper assesses empirically whether global risk aversion (GRA) and some if its determinants (US economic growth and the US long term interest rates) explain developments in Latin American sovereign spreads. We find that GRA is significant and positively related to Latin American sovereign spreads and that its impact varies across countries and over time. Chile, with a lower sovereign risk, is relatively more affected. The opposite is true for Argentina, Ecuador and Venezuela. In addition, the influence of GRA on spreads has risen since the Enron scandal. Finally, both an increase in US economic growth and US long term interest rates are found to reduce spreads while the opposite is true for US short-term interest rates.
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Bibliographic InfoPaper provided by EconWPA in its series International Finance with number 0503005.
Length: 51 pages
Date of creation: 17 Mar 2005
Date of revision:
Note: Type of Document - pdf; pages: 51
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global risk aversion; sovereign spreads; Latin America;
Other versions of this item:
- Alicia Garcia Herrero & Alvaro Ortiz, 2004. "The Role Of Global Risk Aversion In Explaining Latin American Sovereign Spreads," International Finance 0408001, EconWPA.
- Alicia García-Herrero & Álvaro Ortiz, 2005. "The role of global risk aversion in explaining Latin American sovereign spreads," Banco de Espaï¿½a Working Papers 0505, Banco de Espa�a.
- F3 - International Economics - - International Finance
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
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