Determinants of Emerging Market Sovereign Bond Spreads: Fundamentals vs Financial Stress

By Iva Petrova, Michael G. Papaioannou, Dimitri Bellas. Social Science Research Network, 2010

174 citations recorded by the source corpus.

This paper analyses the determimants of emerging market sovereign bond spreads by examining the short and long-run effects of fundamental (macroeconomic) and temporary (financial market) factors on these spreads. During the current global financial and economic crisis, sovereign bond spreads widened dramatically for both developed and emerging market economies. This deterioration has widely been attributed to rapidly growing public debts and balance sheet risks. Our results indicate that in the long run, fundamentals are significant determinants of emerging market sovereign bond spreads, while in the short run, financial volatility is a more important determinant of sperads than fundamentals indicators.

Subfields: Economics and Econometrics, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/18ed598325612c9e429965fa36d1317368f17d62

Citations in the corpus

• Bond Yields in Emerging Economies: It Matters What State You are in (2012, unknown): “McGuire and Schrijvers (2003) find that global risk aversion is a significant factor driving spreads, while Eichengreen and Mody (2000) and Bellas et al. (2010) show that changes in market sentiment affect spreads.”