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Long Memory in Latin American Sovereign Risk: Daily Evidence on the EMBI

Author

Listed:
  • Luis Rodrigo Asturias Schaub
  • Guglielmo Maria Caporale
  • Luis Alberiko Gil-Alana

Abstract

This paper analyses the long-memory properties of sovereign bond spreads in 17 Latin American countries as well as two regional aggregates using daily EMBI (Emerging Markets Bond Index) data from April 2013 to January 2026 (3,163 observations per series). Parametric methods show that all 19 series are characterized by fractional integration with estimated orders ranging from 0.97 (Uruguay) to 1.22 (Honduras) for the log-transformed spreads. Nine series have confidence bounds above unity, indicating that shocks have permanent effects; under autocorrelated errors (as in the Bloomfield model), Uruguay is the only country whose series exhibits mean reversion (as the confidence bands for the fractional parameter are below unity). The results are robust to making different assumptions about the error terms (white noise or autocorrelation) and to allowing for non-linear deterministic trends.

Suggested Citation

  • Luis Rodrigo Asturias Schaub & Guglielmo Maria Caporale & Luis Alberiko Gil-Alana, 2026. "Long Memory in Latin American Sovereign Risk: Daily Evidence on the EMBI," CESifo Working Paper Series 12731, CESifo.
    • Handle: RePEc:ces:ceswps:_12731
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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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