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Global monetary conditions versus country-specific factors in the determination of emerging market debt spreads

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  • Dailami, Mansoor
  • Masson, Paul R.
  • Padou, Jean Jose

Abstract

US interest rate policy is shown to have a significant influence on emerging market bond spreads, but it is important to allow for non-linearities: US interest rates affect secondary market spreads differently, depending on countries' debt levels. Moderate debtors suffer little impact from an increase in US interest rates, while a country close to the borderline of solvency would face a much steeper increase in its spread. A 200 basis points increase in US short-term interest rates would increase emerging market spreads by 6-65Â bps, depending on debt/GNI ratios.

Suggested Citation

  • Dailami, Mansoor & Masson, Paul R. & Padou, Jean Jose, 2008. "Global monetary conditions versus country-specific factors in the determination of emerging market debt spreads," Journal of International Money and Finance, Elsevier, vol. 27(8), pages 1325-1336, December.
  • Handle: RePEc:eee:jimfin:v:27:y:2008:i:8:p:1325-1336
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    More about this item

    Keywords

    Emerging markets Interest rate spreads US monetary policy;

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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