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Characterizing Global Investors' Risk Appetite for Emerging Market Debt During Financial Crises

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  • Mr. Mardi Dungey
  • Ms. Renee Fry
  • Mr. Vance Martin
  • Ms. Brenda Gonzalez-Hermosillo

Abstract

The effects of unanticipated movements in global risk on nine emerging bond markets are investigated. The components of global risk are volatility, credit, and liquidity risks. Country and contagion risks are also studied individually. A historical decomposition of bond spreads is used to identify the relative contributions of risk during 1998-99. The empirical results show that the Russian/LTCM crises were characterized by increases in global credit risk, while the relative size of global risk factors was mixed for the Brazilian crisis, with no component dominating. Country risk is found to be important for all countries, while there is little evidence of contagion risk.

Suggested Citation

  • Mr. Mardi Dungey & Ms. Renee Fry & Mr. Vance Martin & Ms. Brenda Gonzalez-Hermosillo, 2003. "Characterizing Global Investors' Risk Appetite for Emerging Market Debt During Financial Crises," IMF Working Papers 2003/251, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2003/251
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    References listed on IDEAS

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    Cited by:

    1. Coudert, Virginie & Gex, Mathieu, 2008. "Does risk aversion drive financial crises? Testing the predictive power of empirical indicators," Journal of Empirical Finance, Elsevier, vol. 15(2), pages 167-184, March.
    2. Philipp Maier & Garima Vasishtha, 2008. "Good Policies or Good Fortune: What Drives the Compression in Emerging Market Spreads?," Staff Working Papers 08-25, Bank of Canada.
    3. Banerji, Sanjay & Ventouri, Alexia & Wang, Zilong, 2014. "The sovereign spread in Asian emerging economies: The significance of external versus internal factors," Economic Modelling, Elsevier, vol. 36(C), pages 566-576.
    4. Ms. Brenda Gonzalez-Hermosillo, 2008. "Investors’ Risk Appetite and Global Financial Market Conditions," IMF Working Papers 2008/085, International Monetary Fund.
    5. Alicia Garcia Herrero & Alvaro Ortiz, 2004. "The Role Of Global Risk Aversion In Explaining Latin American Sovereign Spreads," International Finance 0408001, University Library of Munich, Germany.
    6. Zinna, Gabriele, 2014. "Identifying risks in emerging market sovereign and corporate bond spreads," Emerging Markets Review, Elsevier, vol. 20(C), pages 1-22.
    7. International Monetary Fund, 2011. "Italy: Selected Issues," IMF Staff Country Reports 2011/176, International Monetary Fund.

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