Emerging Market Spread Compression: Is it Real or is it Liquidity?

By L. Kodres, Kristian J. Hartelius, K. Kashiwase. Social Science Research Network, 2008

147 citations recorded by the source corpus.

Despite recent turmoil, spreads on emerging market countries' sovereign bonds have fallen dramatically since mid-2002. Some have attributed the fall to improved economic fundamentals while others to ample global liquidity. The paper models spreads and attempts to empirically distinguish between the two factors. The results indicate that fundamentals, as embedded in credit ratings, are very important, but that expectations of future U.S. interest rates and volatility in those expectations are also a key determinant of emerging market spreads.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/a84338f2b50fa0897a2ec02214437aaf1a9c8a67

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. E. Baldacci
2. S. Gupta
3. Amine Mati
4. Tam Bayoumi
5. O. Melander
6. H. Hempell
7. Christoffer Kok
8. Tigran Poghosyan

In Finance

1. E. Baldacci
2. Amine Mati
3. S. Gupta
4. Tam Bayoumi
5. O. Melander
6. Christoffer Kok
7. H. Hempell
8. Tigran Poghosyan

Citations in the corpus

• Bond Yields in Emerging Economies: It Matters What State You are in (2012, unknown): “This 7 A Hausman (1978) test was conducted to check whether a fixed effects model is preferable to a random effects model.”
• Sovereign Spreads: Global Risk Aversion, Contagion or Fundamentals? (2010, unknown): “THE INDEX OF GLOBAL RISK AVERSION (IGRA) .......................................................7 B.”
• Is it (Still) Mostly Fiscal? Determinants of Sovereign Spreads in Emerging Markets (2008, background): “Using high frequency data, Hartelius, Kashiwase, and Kodres (2008) show that external global factors (including interest rate expectations and volatility) account for over half of spread dynamics.”
• Credit Matters: Empirical Evidence on U.S. Macro-Financial Linkages (2008, methodology): “Another possible approach for future research would be to apply the methodology used in a paper by Hartelius, Kashiwase and Kodres (2008) .”