Do country fundamentals explain emerging market bond spreads?

  • This paper shows that emerging market eurobond spreads after the Asian crisis can be almost completely explained by market expectations about macroeconomic fundamentals and international interest rates. Contrary to the claim that emerging market bond spreads are driven by market variables such as stock market volatility in the developed countries, it is found that this did not play a significant role after the Asian crisis. Using panel data techniques, it is shown that the determinants of bond spreads can be divided into long-term structural variables and medium-term variables which explain month-to-month changes in bond spreads. As relevant medium-term variables, ''consensus forecasts'' of real GDP growth and inflation, and international interest rates are identified. The long-term structural factors do not explicitly enter the model and show up as fixed or random country-specific effects. These intercepts are highly correlated with the countries' credit rating.

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Metadaten
Author:Roland Beck
URN:urn:nbn:de:hebis:30-9799
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2001,02
Series (Serial Number):CFS working paper series (2001, 02)
Document Type:Working Paper
Language:English
Year of Completion:2001
Year of first Publication:2001
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/06/13
Tag:Bond Spreads; Emerging Markets
GND Keyword:Schwellenländer; Euromarkt; Auslandsanleihe; Risikoprämie; Zinsstruktur; Zinsstrukturtheorie; Emerging Market; Wirtschaftswachstum; Inflation; Länderrating; Länderrisiko; Schätzung
Source:CFS working paper ; 2001,02
HeBIS-PPN:201690314
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht