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Spatial spillovers in emerging market spreads

Author

Listed:
  • Salvatore Dell’Erba
  • Emanuele Baldacci
  • Tigran Poghosyan

Abstract

We use novel spatial econometrics techniques to explore spillovers in the sovereign bond market for 24 emerging economies during 1995–2010. The article extends the previous literature focusing on spillover effects from advanced to emerging economies by analyzing transmission of shocks across emerging markets. After controlling for the impact of global factors, we find strong evidence of spillovers from both sovereign spreads and macroeconomic fundamentals in neighboring emerging economies. In addition to the geographical proximity, the channels of spatial transmission include trade and financial linkages. The results of the article highlight the importance of accounting not only for spillovers from advanced economies to emerging markets but also across emerging markets when analyzing sovereign spreads. Copyright Springer-Verlag Berlin Heidelberg 2013

Suggested Citation

  • Salvatore Dell’Erba & Emanuele Baldacci & Tigran Poghosyan, 2013. "Spatial spillovers in emerging market spreads," Empirical Economics, Springer, vol. 45(2), pages 735-756, October.
    • Handle: RePEc:spr:empeco:v:45:y:2013:i:2:p:735-756
    DOI: 10.1007/s00181-012-0644-7
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    More about this item

    Keywords

    Sovereign spreads; Emerging market; Spillovers; Spatiale conometrics; C23; F30; F32;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F30 - International Economics - - International Finance - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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