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Determinants of Spread and Credit Ratings and Creditworthiness for Emerging Market Sovereign Debt: A Follow-Up Study Using Pooled Data Analysis


  • Peter Rowland



The study presented here is a follow-up study to Rowland and Torres (2004),who used a panel data framework together with data from 16 emerging market issuers to identify the determinants of the spread and the creditworthiness. Since many new issuers of emerging market sovereign debt have emerged recently, we can by using data from one single point in time, end of july 2003, expand our country set to 29 for the analysis of the spread and around 50 for the analysis of the credit ratings and the creditworthiness. We will used an OLS regression framework for the empirical analysis. The study identifies some seven variables that play a role in determining ratings, creditworthiness and spreads. These include the GDP per capita, the economic growth rate, the inflation rate, external-debt ratios, debt-service ratios, the level of international reserves, and the openness of the economy. Emerging market policy makers and investors should pay extra attention to these variables when defining economic policies and evaluating bond issues.

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  • Peter Rowland, 2004. "Determinants of Spread and Credit Ratings and Creditworthiness for Emerging Market Sovereign Debt: A Follow-Up Study Using Pooled Data Analysis," Borradores de Economia 296, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:296

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    1. Álvaro Rojas O. & Felipe Jaque S., 2003. "Determinants of the Chilean Sovereign Spread: is it Purely Fundamentals?," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(2), pages 137-163, July-Dece.
    2. Peter Rowland & José Luis Torres, 2004. "Determinants of Spread and Creditworthiness for Emerging Market Sovereign Debt:A Panel Data Study," Borradores de Economia 295, Banco de la Republica de Colombia.
    3. Budina, Nina & Mantchev, Tzvetan, 2000. "Determinants of Bulgarian Brady bond prices - an empirical assessment," Policy Research Working Paper Series 2277, The World Bank.
    4. Hong G. Min, 1998. "Determinants of emerging market bond spread : do economic fundamentals matter?," Policy Research Working Paper Series 1899, The World Bank.
    5. 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.
    6. António Afonso, 2002. "Understanding the Determinants of Government Debt Ratings: Evidence for the Two Leading Agencies," Working Papers Department of Economics 2002/02, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    7. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    8. Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 37-53.
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