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Identification of Driving Factors for Emerging Markets Sovereign Spreads

Author

Listed:
  • Edward W. Sun

    () (BEM Management School Bordeaux, France)

  • Daniel Tenengauzer

    () (Bank of America Merrill Lynch New York, USA)

  • Ali Bastani

    () (Bank of America Merrill Lynch New York, USA)

  • Omid Rezania

    () (California Public Employees Retirement System Sacramento, USA)

Abstract

The objective of this paper is to identify the relationship between sovereign yield spreads and macroeconomic variables in emerging markets. We find that the correlation between spreads and GDP is negative. Real effective exchange rate depreciation enlarges spreads and increasing in risk aversion influences spreads. US treasury yields impact on spreads is changing over time. More recently lower US treasuries yields have driven spreads wider. Last commodity prices are associated with a reduction in emerging market debt spreads.

Suggested Citation

  • Edward W. Sun & Daniel Tenengauzer & Ali Bastani & Omid Rezania, 2011. "Identification of Driving Factors for Emerging Markets Sovereign Spreads," Economics Bulletin, AccessEcon, vol. 31(3), pages 2584-2592.
  • Handle: RePEc:ebl:ecbull:eb-11-00543
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I3-P232.pdf
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    References listed on IDEAS

    as
    1. Robert A. Jarrow & David Lando & Fan Yu, 2008. "Default Risk And Diversification: Theory And Empirical Implications," World Scientific Book Chapters,in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 19, pages 455-480 World Scientific Publishing Co. Pte. Ltd..
    2. Jens Hilscher & Yves Nosbusch, 2010. "Determinants of Sovereign Risk: Macroeconomic Fundamentals and the Pricing of Sovereign Debt," Review of Finance, European Finance Association, vol. 14(2), pages 235-262.
    3. Paolo Mauro & Nathan Sussman & Yishay Yafeh, 2002. "Emerging Market Spreads: Then versus Now," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 695-733.
    4. Alicia Garcia-Herrero & Alvaro Ortiz, 2006. "The Role of Global Risk Aversion in Explaining Sovereign Spreads," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Fall 2006), pages 125-155, August.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Bouri, Elie & de Boyrie, Maria E. & Pavlova, Ivelina, 2017. "Volatility transmission from commodity markets to sovereign CDS spreads in emerging and frontier countries," International Review of Financial Analysis, Elsevier, vol. 49(C), pages 155-165.

    More about this item

    Keywords

    Bond spread; Cointegration; Emerging market CDS; Sovereign bond;

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • F3 - International Economics - - International Finance

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