Bond yields in emerging economies: It matters what state you are in

Jaramillo, Laura; Weber, Anke

doi:10.1016/j.ememar.2013.09.003

Cited by 66 publications

(21 citation statements)

References 32 publications

(24 reference statements)

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“…Their major finding is supported by Akram and Das ( 2014) who investigated determinants of the Japanese long-term rates and find that low monetary policy rates had an influence on the long-term rates in Japan. Jaramillo and Weber (2013) and Chowdhury et al (2013) focus on the impact of fiscal policy variables on the long-term rate in different regimes. Using panel threshold technique, Jaramillo and Weber (2013) investigate the determinants of the long-term bond yields on 26 emerging market economies for the period 2005 to 2011.…”

Section: Empirical Literaturementioning

confidence: 99%

“…Jaramillo and Weber (2013) and Chowdhury et al (2013) focus on the impact of fiscal policy variables on the long-term rate in different regimes. Using panel threshold technique, Jaramillo and Weber (2013) investigate the determinants of the long-term bond yields on 26 emerging market economies for the period 2005 to 2011. However, a weakness in their analysis was in using data with several gaps since most emerging economies did not have consistent data on long-term bond yields or other variables.…”

Section: Empirical Literaturementioning

confidence: 99%

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Macroeconomic determinants of long-term sovereign bond yields in South Africa

Zhou

2021

Cogent Economics & Finance

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This paper seeks to analyse the impact of government debt and other macroeconomic variables on the long term bond yield for South Africa. Recent increases in the government budget deficit and its corresponding borrowing has renewed interest in understanding fiscal dynamics within the economy. The study employs both the linear and non-linear Auto-regressive distributed lag (ARDL) technique to estimate the determinants of the long-term bond yield. Our results show that the short-term interest rate is the major determinant of the long term yield in both the short-run and long-run. Government debt and the US long term yield positively impact long term bond yields both in the short-and long-run. The rate of inflation, economic growth, nominal effective exchange rate and bank credit all have negative effects on the bond yield in the long-run. Tests for non-linearity reveal that the short-term interest rate has an asymmetric relationship with the long-term bond yield. However, we only establish non-linearity between government debt and bond yields in the long-run. We suggest complementarity between monetary policy and fiscal policy, a systematic program of deleveraging and implementation of structural changes aimed at increasing production.

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Section: Empirical Literaturementioning

confidence: 99%

Section: Empirical Literaturementioning

confidence: 99%

Macroeconomic determinants of long-term sovereign bond yields in South Africa

Zhou

2021

Cogent Economics & Finance

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“…Dumicic and Ridzak (2011) find that macroeconomic indicators and global factors drive spreads in the CEE countries at all times, while sovereign risk and external solvency indicators become significant only during crisis periods. Applying a panel threshold estimation, Jaramillo and Weber (2012) find that fiscal variables determine spreads in the periods of high risk aversion, while macro variables become important determinants of spreads during low risk-aversion periods. Comelli (2012) finds that the size and significance of the coefficient of country fundamentals and global factors varies across regions and over time.…”

Section: Related Literaturementioning

confidence: 99%

Determinants of Sovereign Bond Spreads in Emerging Markets: Local Fundamentals and Global Factors vs. Ever-Changing Misalignments

Csonto¹,

Ivaschenko²

2013

IMF Working Papers

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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 countryspecific 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 market stress, 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. JEL Classification Numbers: E43, G12, G15

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“…On the theme of SCRs informational value, there are many more variations. These include: (a) the studies on the "above and beyond" information of SCRs informational value on SBYs (Afonso et al, 2013;Miricescu, 2015;Jaramillo & Tejada, 2011;Jaramillo & Weber, 2013;Sy, 2002), (b) earlier studies using SCRs as proxy of credit risk component on sovereign credit default swap spreads (SCDSSs) (Badaoui et al, 2013;Beber et al, 2009;Culp et al, 2016;Hull & White, 2000;Longstaff et al, 2011), and (c) the study on causality on split-SCRs amongst the CRAs (Alsakka & Gwilym, 2010a, 2010b.…”

Section: Literature Reviewmentioning

confidence: 99%

An Analysis of the Informational Value of Sovereign Credit Ratings

Lim

Kwek

2021

MJES

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The sovereign credit ratings (SCRs) have been an integral part in the global financial system in asset allocation and price discovery. The zero bound policy rate (ZBPR) and quantitative easing programme (QEP) rolled out by the four key central banks as antidotes to the global financial crisis (GFC) would have altered the assumed premise on SCRs relevancy. This preliminary study is crafted for a validation on whether the SCRs informational value on sovereign bond yields (SBYs) and sovereign credit default swap spreads (SCDSSs) was indeed affected when ZBPR and QEP were in effect. A sample of 32 countries with observations spanning from 2008 to 2017 to encompass the period of ZBPR and QEP in effect was used for analysis. The empirical results show that SCRs informational value was indeed rendered irrelevant on SBYs price discovery since 2008 and the effect on SCDSSs came in later from 2012 onwards.

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Bond yields in emerging economies: It matters what state you are in

Cited by 66 publications

References 32 publications

Macroeconomic determinants of long-term sovereign bond yields in South Africa

Macroeconomic determinants of long-term sovereign bond yields in South Africa

Determinants of Sovereign Bond Spreads in Emerging Markets: Local Fundamentals and Global Factors vs. Ever-Changing Misalignments

An Analysis of the Informational Value of Sovereign Credit Ratings

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