Emerging Market Spreads: Then Versus Now

By Paolo Mauro, N. Sussman, Yishay Yafeh. Social Science Research Network, 2002

263 citations recorded by the source corpus.

This paper analyzes yield spreads on sovereign debt issued by emerging markets using modern data from the 1990s and newly-collected historical data on debt traded in London during 1870–1913, a previous “golden era†for international capital market integration. Applying several empirical approaches, we show that the co-movement of spreads across emerging markets is higher today than it was in the historical sample. We also show that sharp changes in spreads today tend to be mostly related to global events, whereas country-specific events played a bigger role in 1870–1913. Although we find some evidence that economic fundamentals, too, co-move more strongly today than at that time, our interpretation of the results is that today’s investors pay less attention to country-specific events than their predecessors did in 1870–1913.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/aff13a6695b7b927a90a1f34afcd894fc60de15f

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. Kenneth S. Rogoff
2. Shang-jin Wei
3. Eswar S. Prasad
4. Carmen M. Reinhart
5. Olivier Jeanne
6. Ayhan Kose
7. Jeffrey A. Frankel
8. A. Mody

In Finance

1. Kenneth S. Rogoff
2. Eswar S. Prasad
3. Shang-jin Wei
4. Ayhan Kose
5. Carmen M. Reinhart
6. Jeffrey A. Frankel
7. Olivier Jeanne
8. A. Mody

Citations in the corpus

• News Spillovers in the Sovereign Debt Market (2003, unknown): “Also, see Karolyi and Stulz (1996) for an analysis of stock return co-movements between the United States and Japan, and Mauro et al. (2002) for an analysis of the co-movement of emerging market yield spreads in the 1990s as compared with 1870–1913, a previous era of global capital market…”
• Wealth bias in the first global capital market boom, 1870¿1913 (2004, unknown): “Figure 3 reveals a massive global convergence in bond spreads in the years leading up to World 324 [ A P R I L T H E E C O N O M I C J O U R N A L Ó Royal Economic Society 2004 War 1, a phenomenon discussed elsewhere (Mauro et al., 2002).”
• The Dynamic Pricing of Sovereign Risk in Emerging Markets: Fundamentals and Risk Aversion (2008, unknown): “The concept of risk aversion has been previously linked with emerging market debt spreads by McGuire and Schrijvers (2003), Baek et al (2005), Garcia-Herrero and Ortiz (2006) and references therein.”
• Political Risk and International Valuation (2016, unknown): “Mauro et al. (2002) show that emerging market sovereign spreads currently comove much more than they did in a historical 1870–1913 sample, and that major fluctuations are tied to global events to a greater degree in more recent years.”
• Effects of Financial Globalization on Developing Countries: Some Empirical Evidence (2003, background): “Moreover, foreign aid flows to many small states are highly volatile and tend to be positively correlated with domestic GDP, implying that they might be further contributing to the volatility of income in these countries.”