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Impact of IMF-related news on capital markets: Further evidence from bond spreads in Indonesia and Korea

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  • Evrensel, Ayse Y.
  • Kutan, Ali M.

Abstract

The IMF's effects on private capital markets have attracted increasing attention in the literature. This paper examines whether IMF-related news during the Asian crisis contains information regarding the changes in sovereign bond spreads of Indonesia and Korea. Our results indicate that other countries' IMF-related news increases these countries' bond spreads. Both in Indonesia and Korea, the countries' own news associated with program negotiations and approval decreases bond spreads. With respect to the interpretations of the impact of IMF news on private capital markets, we show that the current interpretations vary and identify this issue as an important future research agenda.

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  • Evrensel, Ayse Y. & Kutan, Ali M., 2008. "Impact of IMF-related news on capital markets: Further evidence from bond spreads in Indonesia and Korea," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 147-160, April.
  • Handle: RePEc:eee:intfin:v:18:y:2008:i:2:p:147-160
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    References listed on IDEAS

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    1. Kanokwan Chancharoenchai & Sel Dibooglu, 2006. "Volatility Spillovers and Contagion During the Asian Crisis: Evidence from Six Southeast Asian Stock Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 42(2), pages 4-17, April.
    2. Ender Su & Thomas W. Knowles, 2006. "Asian Pacific Stock Market Volatility Modeling and Value at Risk Analysis," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 42(2), pages 18-62, April.
    3. Eichengreen, Barry & Kletzer, Kenneth & Mody, Ashoka, 2006. "The IMF in a world of private capital markets," Journal of Banking & Finance, Elsevier, vol. 30(5), pages 1335-1357, May.
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    5. Longstaff, Francis A & Schwartz, Eduardo S, 1995. " A Simple Approach to Valuing Risky Fixed and Floating Rate Debt," Journal of Finance, American Finance Association, vol. 50(3), pages 789-819, July.
    6. Hayo, Bernd & Kutan, Ali M., 2005. "IMF-related news and emerging financial markets," Journal of International Money and Finance, Elsevier, vol. 24(7), pages 1126-1142, November.
    7. Kanokwan Chancharoenchai & Sel Diboog¬Lu & Ike Mathur, 2005. "Stock Returns and the Macroeconomic Environment Prior to the Asian Crisis in Selected Southeast Asian Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(4), pages 38-56, August.
    8. Batten, Jonathan A. & Fetherston, Thomas A. & Hoontrakul, Pongsak, 2006. "Factors affecting the yields of emerging market issuers: Evidence from the Asia-Pacific region," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(1), pages 57-70, February.
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    Cited by:

    1. Evrensel, Ayse & Kutan, Ali M., 2008. "How do IMF announcements affect financial markets in crises?: Evidence from forward exchange markets," Journal of Financial Stability, Elsevier, vol. 4(2), pages 121-134, June.
    2. Kutan, Ali M. & Muradoglu, Gulnur, 2014. "Investor wealth, the IMF, and the Asian crisis," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 130-137.
    3. Apergis, Nicholas, 2015. "Newswire messages and sovereign credit ratings: Evidence from European countries under austerity reform programmes," International Review of Financial Analysis, Elsevier, vol. 39(C), pages 54-62.
    4. Kutan, Ali M. & Muradoğlu, Yaz G., 2016. "Financial and real sector returns, IMF-related news, and the Asian crisis," Finance Research Letters, Elsevier, vol. 16(C), pages 28-37.
    5. Brzeszczyński, Janusz & Gajdka, Jerzy & Kutan, Ali M., 2015. "Investor response to public news, sentiment and institutional trading in emerging markets: A review," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 338-352.
    6. Kutan, Ali M. & Muradoglu, Gulnur & Sudjana, Brasukra G., 2012. "IMF programs, financial and real sector performance, and the Asian crisis," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 164-182.
    7. Ali M. Kutan & Yaz Gülnür Muradoğlu & Zhong Yu, 2016. "Worldwide impact of IMF policies during the Asian crisis: who does the IMF help, creditors or crisis countries?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 19(2), pages 116-147, June.

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