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Bloodshed or Reforms? The Determinants of Sovereign Bond Spreads in 1870-1913 and Today

Author

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  • Sussman, Nathan
  • Yafeh, Yishay
  • Mauro, Paolo

Abstract

Drawing on a newly-collected data set on bond yields, macroeconomic variables, and news of various categories for a panel of emerging markets, we provide the first comparative analysis of the determinants of sovereign bond spreads in the first era of financial globalization and bond finance (1870-1913) and today (1994-2002). We find that news about wars or episodes of politically-motivated violence are a significant and robust determinant of spreads; fiscal variables also play a role; in contrast, news about institutional reforms seldom have a rapid and significant impact. There are also important differences between the two eras: country-specific fundamentals account for a greater share of variation in spreads during the pre-WWI period than today.

Suggested Citation

  • Sussman, Nathan & Yafeh, Yishay & Mauro, Paolo, 2006. "Bloodshed or Reforms? The Determinants of Sovereign Bond Spreads in 1870-1913 and Today," CEPR Discussion Papers 5528, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5528
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    References listed on IDEAS

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    1. Paolo Mauro & Nathan Sussman & Yishay Yafeh, 2002. "Emerging Market Spreads: Then versus Now," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 695-733.
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    6. Mauro, Paolo & Sussman, Nathan & Yafeh, Yishay, 2007. "Emerging Markets and Financial Globalization: Sovereign Bond Spreads in 1870-1913 and Today," OUP Catalogue, Oxford University Press, number 9780199226139.
    7. Flandreau, Marc & Sussman, Nathan, 2004. "Old Sins: Exchange Rate Clauses and European Foreign Lending in the 19th Century," CEPR Discussion Papers 4248, C.E.P.R. Discussion Papers.
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    1. repec:hal:spmain:info:hdl:2441/806 is not listed on IDEAS
    2. Asaf Zussman & Noam Zussman & Morten Ørregaard Nielsen, 2008. "Asset Market Perspectives on the Israeli–Palestinian Conflict," Economica, London School of Economics and Political Science, vol. 75(297), pages 84-115, February.
    3. Sébastian Nieto Parra & Javier Santiso, 2006. "The usual suspects: Investment Banks’ Recommendations and Emerging Markets," Sciences Po publications info:hdl:2441/806, Sciences Po.
    4. Moser, Christoph, 2007. "The Impact of Political Risk on Sovereign Bond Spreads - Evidence from Latin America," Proceedings of the German Development Economics Conference, Göttingen 2007 24, Verein für Socialpolitik, Research Committee Development Economics.

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    More about this item

    Keywords

    Emerging markets; Financial globalization; Bond yields;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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