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Dollarization and the relationship between EMBI and fundamentals in Latin American countries

  • Lorena Mari del Cristo

    ()

    (Department of Economic Theory, Universitat de Barcelona)

  • Marta Gómez-Puig

    ()

    (Department of Economic Theory, Riskcenter-IREA, Universitat de Barcelona)

This paper presents empirical evidence on the interrelationship that exists between the evolution of the Emerging Markets Bonds Index (EMBI) and some macroeconomic variables in seven Latin American countries; two of them (Ecuador and Panama), full dollarized. We make use of a Cointegrated Vector framework to analyze the short run effects from 2001 to 2009. The results suggest that EMBI is more stable in dollarized countries and that its evolution influences economic activity in non-dollarized economies; suggesting that investors confidence might be higher in dollarized countries where real and financial economic evolution are less tied than in non-dollarized ones.

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File URL: http://www.ub.edu/riskcenter/research/WP/UBriskcenterWP201402.pdf
File Function: First version, 2014
Download Restriction: no

Paper provided by Universitat de Barcelona, UB Riskcenter in its series Working Papers with number 2014-02.

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Length: 35 pages
Date of creation: Feb 2014
Date of revision:
Handle: RePEc:bak:wpaper:201402
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  1. Suhejla Hoti & Michael McAleer, 2004. "An Empirical Assessment of Country Risk Ratings and Associated Models," Journal of Economic Surveys, Wiley Blackwell, vol. 18(4), pages 539-588, 09.
  2. Hernando Vargas & Andrés González & Ignacio Lozano, 2012. "Macroeconomic Effects of Structural Fiscal Policy Changes in Colombia," BORRADORES DE ECONOMIA 009314, BANCO DE LA REPÚBLICA.
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  7. Rose, Andrew K., 2013. "Surprising similarities: recent monetary regimes of small economies," Proceedings, Federal Reserve Bank of San Francisco, issue Nov, pages 1-44.
  8. Barry Eichengreen & Ashoka Mody, 1998. "What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?," NBER Working Papers 6408, National Bureau of Economic Research, Inc.
  9. Peter Rowland & José Luis Torres, . "Determinants of Spread and Creditworthiness for Emerging Market Sovereign Debt:A Panel Data Study," Borradores de Economia 295, Banco de la Republica de Colombia.
  10. Marcello Pericoli & Massimo Sbracia, 2001. "A Primer on Financial Contagion," Temi di discussione (Economic working papers) 407, Bank of Italy, Economic Research and International Relations Area.
  11. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," NBER Working Papers 5893, National Bureau of Economic Research, Inc.
  12. Andrea Fracasso, 2006. "The role of foreign and domestic factors in the evolution of the Brazilian EMBI spread and debt dynamics," IHEID Working Papers 22-2007, Economics Section, The Graduate Institute of International Studies, revised Jul 2007.
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