IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Convergence and Divergence of Sovereign Bond Spreads: Lessons From Latin America

Listed author(s):
  • Martin Grandes
Registered author(s):

    Latin American sovereign bonds represent a significant share of the emerging debt class (50 per cent by early 2001) and so have considerably shaped the dynamics of this market. Recent financial turmoil, contagion episodes and investors’ renewed concerns with debt default call for a better understanding of sovereign bond pricing (spreads) and its determinants, either macro fundamentals, contagion or other external variables. This paper addresses two important questions not fully tackled in the existing literature: i) to what extent do permanent or transitory changes in fundamentals affect sovereign risk perception, i.e. default risk, once contagion is controlled for? ii) how can a relatively high and volatile spread be the cause of unsustainable public debt accumulation? In order to answer these questions, we estimate long-term structural equations to pin down country risk determinants for Argentina, Chile and Mexico, using a time series framework spanning 1994-2000. Unlike former ... Les obligations émises par les pouvoirs publics latino-américains représentent une proportion importante de la dette des pays émergents (50 pour cent début 2001) et influent donc de manière significative sur les dynamiques de ce marché. La récente tempête financière, les phénomènes de contagion et les inquiétudes nouvelles des investisseurs quant au risque de non-remboursement de la dette exigent d’approfondir les mécanismes de déterminations du cours des obligations souveraines (spreads) : paramètres macro-économiques fondamentaux, contagion ou autres variables externes. Ce Document technique examine deux points pas suffisamment traités jusque-là : i) dans quelle mesure les évolutions permanentes ou conjoncturelles des fondamentaux affectent-ils la perception du risque souverain, c’est-à-dire le risque de défaut de paiement, une fois tenu compte des phénomènes de contagion ? ; ii) comment des primes de risque relativement élevées et volatiles peuvent-elles provoquer l’accumulation ...

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by OECD Publishing in its series OECD Development Centre Working Papers with number 200.

    in new window

    Date of creation: 01 Oct 2002
    Handle: RePEc:oec:devaaa:200-en
    Contact details of provider: Postal:
    2 rue Andre Pascal, 75775 Paris Cedex 16

    Phone: 33-(0)-1-45 24 82 00
    Fax: 33-(0)-1-45 24 85 00
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:oec:devaaa:200-en. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.