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Sovereign Spreads and Contagion Risks in Asia

  • D. Filiz Unsal
  • Carlos Caceres

This paper explores how much of the movements in the sovereign spreads of Asian economies over the course of the global financial crisis has reflected shifts in (i) global risk aversion; (ii) country-specific risks, directly from worsening fundamentals, and indirectly from spillovers originating in other sovereigns and the uncertainty surrounding exchange rates. Earlier in the crisis, the increase in market-implied contagion led to higher Asian sovereign bond yield spreads over swaps. But, after the crisis, Asia’s sovereign spreads normalized, despite the debt crisis in the euro area, reflecting a fall in both exchange rate and spillover risks.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/134.

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Length: 25
Date of creation: 01 Jun 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/134
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  1. Lorenzo Codogno & Carlo Favero & Alessandro Missale, 2003. "Yield spreads on EMU government bonds," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 503-532, October.
  2. Iva Petrova & Michael G Papaioannou & Dimitri Bellas, 2010. "Determinants of Emerging Market Sovereign Bond Spreads; Fundamentals Vs Financial Stress," IMF Working Papers 10/281, International Monetary Fund.
  3. Sanjeev Gupta & Amine Mati & Emanuele Baldacci, 2008. "Is it (Still) Mostly Fiscal? Determinants of Sovereign Spreads in Emerging Markets," IMF Working Papers 08/259, International Monetary Fund.
  4. Alois Geyer & Stephan Kossmeier & Stefan Pichler, 2004. "Measuring Systematic Risk in EMU Government Yield Spreads," Review of Finance, Springer, vol. 8(2), pages 171-197.
  5. Miguel A. Segoviano Basurto & Raphael A. Espinoza, 2011. "Probabilities of Default and the Market Price of Risk in a Distressed Economy," IMF Working Papers 11/75, International Monetary Fund.
  6. Miguel Segoviano, 2006. "Consistent Information Multivariate Density Optimizing Methodology," FMG Discussion Papers dp557, Financial Markets Group.
  7. Alberto Behar, 2009. "Tax Wedges, Unemployment Benefits and Labour Market Outcomes in the New EU Members," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(1), pages 069-092, March.
  8. Schuknecht, Ludger & von Hagen, Jürgen & Wolswijk, Guido, 2010. "Government bond risk premiums in the EU revisited: the impact of the financial crisis," Working Paper Series 1152, European Central Bank.
  9. Miguel A. Segoviano Basurto & Carlos Caceres & Vincenzo Guzzo, 2010. "Sovereign Spreads; Global Risk Aversion, Contagion or Fundamentals?," IMF Working Papers 10/120, International Monetary Fund.
  10. Charles Goodhart & Miguel Segoviano, 2009. "Banking Stability Measures," FMG Discussion Papers dp627, Financial Markets Group.
  11. Edda Zoli & Silvia Sgherri, 2009. "Euro Area Sovereign Risk During the Crisis," IMF Working Papers 09/222, International Monetary Fund.
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