Is It Still Mostly Fiscal Determinants Of Sovereign Spreads In Emerging Markets

Author : Mr.Amine Mati
Publisher : International Monetary Fund
ISBN 13 : 1451871171
Total Pages : 25 pages
Book Rating : 4.73/5 ( download)

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Download or read book Is it (Still) Mostly Fiscal? Determinants of Sovereign Spreads in Emerging Markets written by Mr.Amine Mati and published by International Monetary Fund. This book was released on 2008-11-01 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a panel of 30 emerging market economies from 1997 to 2007, this paper investigates the determinants of country risk premiums as measured by sovereign bond spreads. Unlike previous studies, the results indicate that both fiscal and political factors matter for credit risk in emerging markets. Lower levels of political risk are associated with tighter spreads, while efforts at fiscal consolidation narrow credit spreads, especially in countries that experienced prior defaults. The composition of fiscal policy matters: spending on public investment contributes to lower spreads as long as the fiscal position remains sustainable and the fiscal deficit does not worsen.

Author : Amine Mati
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.57/5 ( download)

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Download or read book IMF Working Papers written by Amine Mati and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Author : Mr.Balazs Csonto
Publisher : International Monetary Fund
ISBN 13 : 1484361482
Total Pages : 42 pages
Book Rating : 4.81/5 ( download)

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Download or read book Determinants of Sovereign Bond Spreads in Emerging Markets written by Mr.Balazs Csonto and published by International Monetary Fund. This book was released on 2013-07-10 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the relationship between global and country-specific factors and emerging market debt spreads from three different angles. First, we aim to disentangle the effect of global and country-specific developments, and find that while both country-specific and global developments are important in the long-run, global factors are main determinants of spreads in the short-run. Second, we investigate whether and how the strength of fundamentals is related to the sensitivity of spreads to global factors. Countries with stronger fundamentals tend to have lower sensitivity to changes in global risk aversion. Third, we decompose changes in spreads and analyze the behavior of explained and unexplained components over different periods. To do so, we break down fitted changes in spreads into the contribution of country-specific and global factors, as well as decompose changes in the residual into the correction of initial misalignment and an increase/decrease in misalignment. We find that changes in spreads follow periods of tightening/widening, which are well-explained by the model; and the dynamics of the components of the unexplained residual follow all the major developments that impact market sentiment. In particular, we find that in the periods of severe marketstress, such as during the intensive phase of the Eurozone debt crisis, global factors tend to drive changes in the spreads and the misalignment tends to increase in magnitude and its relative share in actual spreads.

Author : Iva Petrova
Publisher : International Monetary Fund
ISBN 13 : 1455210889
Total Pages : 27 pages
Book Rating : 4.86/5 ( download)

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Download or read book Determinants of Emerging Market Sovereign Bond Spreads written by Iva Petrova and published by International Monetary Fund. This book was released on 2010-12-01 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Author : Laura Jaramillo
Publisher : International Monetary Fund
ISBN 13 : 1455218987
Total Pages : 19 pages
Book Rating : 4.81/5 ( download)

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Download or read book Sovereign Credit Ratings and Spreads in Emerging Markets written by Laura Jaramillo and published by International Monetary Fund. This book was released on 2011-03-01 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: Sovereign investment grade status is often associated with lower spreads in international markets. Using a panel framework for 35 emerging markets between 1997 and 2010, thispaper finds that investment grade status reduces spreads by 36 percent, above and beyond what is implied by macroeconomic fundamentals. This compares to a 5-10 percent reduction in spreads following upgrades within the investment grade asset class, and no impact formovements within the speculative grade asset class, ceteris paribus. While global financial conditions play a central role in determining spreads, market sentiment improves with lower external public debt to GDP levels and higher domestic growth rates.

Author : Mr.Amadou N. R. Sy
Publisher : INTERNATIONAL MONETARY FUND
ISBN 13 : 9781451858051
Total Pages : 0 pages
Book Rating : 4.51/5 ( download)

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Download or read book Emerging Market Bond Spreads and Sovereign Credit Ratings written by Mr.Amadou N. R. Sy and published by INTERNATIONAL MONETARY FUND. This book was released on 2001-10-01 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses a panel data estimation of a simple univariate model of sovereign spreads on ratings to analyze statistically significant deviations from the estimated relationship. We find evidence of an asymmetric adjustment of spreads and ratings when such deviations are significant. In addition, the paper illustrates how significant disagreements between market and rating agencies' views can be used as a signal that further technical and sovereign analysis is warranted. For instance, we find that spreads were "excessively low" for most emerging markets before the Asian crisis. More recently, spreads were "excessively high" for a number of emerging markets.

Author : Timo Daehler
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.59/5 ( download)

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Download or read book Emerging Markets Sovereign Spreads and Country-Specific Fundamentals During COVID-19 written by Timo Daehler and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This case study compares the importance of prevailing market factors against COVID-19 dynamics and policy responses in explaining the daily evolution of emerging market (EM) sovereign CDS spreads during the first half of 2020. We adopt a two-stage econometric approach. In the first stage, we estimate a multi-factor model for changes in EM CDS spreads over the pre-COVID-19 period of January 2014 through June 2019. Among the factors are a regional and a global one with the former capturing the CDS dynamic of a country's regional EM peers and the latter capturing the CDS dynamic of advanced economies (the US, Eurozone, and Japan). Next, we extrapolate model-implied changes in CDS spreads from July 2019 to June 2020. The model traces the realized sovereign spreads well over the rest of 2019, breaks down in 2020, and sees the biggest deviations from model-implied values during peak COVID in March. In the second stage, we find that the March 2020 divergence is partly accounted for by traditional determinants such as fiscal space, oil shocks, and monetary policies by the FED and the ECB rather than by COVID-specific risks and associated policies. In particular, COVID cases, mortalities, and virus containment policies were no significant drivers of CDS spread adjustments over this period. Overall, the study points to two results: On the one hand, the residuals during COVID suggest a time-varying relationship between sovereign CDS spreads and explanatory variables. On the other hand, the residuals were not driven by COVID-specific risks but rather by traditional drivers of sovereign debt pricing.

Author : Mr.Giovanni Dell'Ariccia
Publisher : International Monetary Fund
ISBN 13 : 1484359623
Total Pages : 54 pages
Book Rating : 4.24/5 ( download)

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Download or read book Managing the Sovereign-Bank Nexus written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2018-09-07 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.

Author : Mahmood Pradhan
Publisher : International Monetary Fund
ISBN 13 : 1463935129
Total Pages : 45 pages
Book Rating : 4.22/5 ( download)

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Download or read book Policy Responses to Capital Flows in Emerging Markets written by Mahmood Pradhan and published by International Monetary Fund. This book was released on 2011-04-20 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues. This Web-only series replaced Staff Position Notes in January 2011.

Author : Giancarlo Corsetti
Publisher : International Monetary Fund
ISBN 13 : 1475516800
Total Pages : 49 pages
Book Rating : 4.07/5 ( download)

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Download or read book Sovereign Risk and Belief-Driven Fluctuations in the Euro Area written by Giancarlo Corsetti and published by International Monetary Fund. This book was released on 2013-11-06 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: Sovereign risk premia in several euro area countries have risen markedly since 2008, driving up credit spreads in the private sector as well. We propose a New Keynesian model of a two-region monetary union that accounts for this “sovereign risk channel.” The model is calibrated to the euro area as of mid-2012. We show that a combination of sovereign risk in one region and strongly procyclical fiscal policy at the aggregate level exacerbates the risk of belief-driven deflationary downturns. The model provides an argument in favor of coordinated, asymmetric fiscal stances as a way to prevent selffulfilling debt crises.