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The Determinants of Sovereign Spreads in Emerging Markets

  • Olcay Yucel Culha
  • Fatih Ozatay
  • Gulbin Sahinbeyoglu

This study analyzes both short-run and long-run determinants of the sovereign spreads in a set of 21 emerging countries over the period 1998-2004 utilizing both daily and monthly data and estimate individual country and panel regressions. Our analysis shows that both domestic and international factors affect spreads, where the most important common determinant of the spreads is found to be the risk appetite of foreign investors. By using an event study methodology we find no evidence of impact of the FOMC announcements on spreads. Finally, we analyze whether news regarding domestic politics and announcements of international organizations play a role in the evolution of spreads. Using the postcrisis data of Turkey, we point out an important effect of such news releases.

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File URL: http://www.tcmb.gov.tr/wps/wcm/connect/3bf4c25e-d52d-465d-a835-d345485b9e6b/WP0604ENG.pdf?MOD=AJPERES&CACHEID=3bf4c25e-d52d-465d-a835-d345485b9e6b
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Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 0604.

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Date of creation: 2006
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Handle: RePEc:tcb:wpaper:0604
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  15. Fornari, Fabio & Monticelli, Carlo & Pericoli, Marcello & Tivegna, Massimo, 2002. "The impact of news on the exchange rate of the lira and long-term interest rates," Economic Modelling, Elsevier, vol. 19(4), pages 611-639, August.
  16. Fatih Ozatay, 2005. "Monetary Policy Challenges for Turkey in European Union Accession Process," Working Papers 0511, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
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