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Spatial Spillovers in Emerging Market Spreads

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  • Salvatore Dell'Erba
  • Emanuele Baldacci
  • Tigran Poghosyan

Abstract

We use novel spatial econometrics techniques to explore spillovers in the sovereign bond market for 24 emerging economies during 1995-2010. The paper extends the previous literature focusing on spillover effects from advanced to emerging economies by analyzing transmission of shocks across emerging markets. After controlling for the impact of global factors, we find strong evidence of spillovers from both sovereign spreads and macroeconomic fundamentals in neighboring emerging economies. In addition to the geographical proximity, the channels of spatial transmission include trade and financial linkages. The results of the paper highlight the importance of accounting not only for spillovers from advanced economies to emerging markets, but also across emerging markets when analyzing sovereign spreads.

Suggested Citation

  • Salvatore Dell'Erba & Emanuele Baldacci & Tigran Poghosyan, 2011. "Spatial Spillovers in Emerging Market Spreads," IMF Working Papers 11/221, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/221
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    References listed on IDEAS

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    Cited by:

    1. Tonzer, Lena, 2015. "Cross-border interbank networks, banking risk and contagion," Journal of Financial Stability, Elsevier, vol. 18(C), pages 19-32.
    2. Shugo Yamamoto, 2015. "Banking Network Amplification Effects on Cross-Border Bank Flows," Discussion Papers 1533, Graduate School of Economics, Kobe University.
    3. Andrea Presbitero & Dhaneshwar Ghura & Olumuyiwa S Adedeji & Lamin Njie, 2015. "International Sovereign Bonds by Emerging Markets and Developing Economies; Drivers of Issuance and Spreads," IMF Working Papers 15/275, International Monetary Fund.
    4. Nazim Belhocine & Salvatore Dell'Erba, 2013. "The Impact of Debt Sustainability and the Level of Debt on Emerging Markets Spreads," IMF Working Papers 13/93, International Monetary Fund.
    5. repec:eco:journ1:2017-05-48 is not listed on IDEAS

    More about this item

    Keywords

    Spillovers; sovereign spreads; emerging market; spatial econometrics; external debt; bond; currency crises; sovereign bond; total external debt; International Finance: General;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F30 - International Economics - - International Finance - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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