Determinants of Emerging Market Sovereign Bond Spreads

Bellas, Dimitri; Papaioannou, Michael G.; Petrova, Iva

doi:10.1596/9780821384831_ch04

Cited by 23 publications

(14 citation statements)

References 9 publications

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“…Bellas, Papaioannou, and Petrova (2010) results indicate that in the long run, fundamentals are considerable determinants of emerging market sovereign bond spreads, while in the short run, financial volatility is rather the substantial determinant of spreads. Furthermore, researchers have also distinguished between the determinants of sovereign bond spreads during normal and crisis periods.…”

Section: Nietzsche: Human All Too Human: a Book For Free Spiritsmentioning

confidence: 89%

Excessive Debt or Excess Savings -- Transition Countries Sovereign Bond Spread Assessment

Petkov¹

2017

IBR

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We study the sovereign yield spreads determinants in transition -Central and Eastern Europe (CEE) and Caucasus and Central Asia (CCA) --countries and try to provide an answer to the key question: was the narrowing of the spreads and their compression a result of improvement of CEECCA countries sovereign"s macroeconomic policy (implemented in early to mid 2000s), or was it due to global excess liquidity provision? If better domestic macroeconomic policy efforts and solid reforms implemented in this period have led to: i) improvement in sovereign debt management e.g., by increasing the average debt portfolio duration and reducing the stock of FOREX debt; ii) development of domestic financial markets with enlargement of the investor"s base and enhancement of the risk management techniques; iii) continuing financial liberalization; iv) sustainable fiscal adjustment, reserve accumulation and price stability; and v) adoption of the most conductive to prosperity institutional structure, then it would be expected that any tighter monetary policy environment in the developed economies should have only a tiny effect on spreads.The models are estimated on an individual basis --country by country --using a framework allowing for fractionally integrated variables (ARDL) as well as, by utilising panel data (cross-sectional-time-series) estimation whenever data availability allows.We utilise daily data over the period 2006-2012 and quarterly data over the period 2002-2011. These are the periods for which meaningful comparable data are available for Bulgaria, Croatia, Hungary, Kazakhstan, Poland, Russia, Serbia, and Ukraine (in various combinations).We are careful not to attempt to split the sample into (say two) potential segments for comparison of "normal" versus "crises" period estimates (as customary) as since 2002 / 2003 the transition economies have started to experience the powerful financial effect generated by the excess global liquidity, i.e., the entire period under consideration is constituted by two phases characterised by: i) excess liquidity (2002)(2003)(2004)(2005)(2006)(2007)(2008); and, ii) the Great Depression Mark II (2008 -to present).

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Section: Nietzsche: Human All Too Human: a Book For Free Spiritsmentioning

confidence: 89%

Excessive Debt or Excess Savings -- Transition Countries Sovereign Bond Spread Assessment

Petkov¹

2017

IBR

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“…In the previous section, we noted that past empirical studies of the impact of fiscal rules on borrowing spreads typically searched for fiscal rule effects by incorporating a fiscal rule adoption dummy into a data panel to examine the statistical significance and sign of the coefficient on the dummy variable. We follow this practice with our first set of estimates, which are based on a model that embeds a fiscal rule dummy in a standard model (e.g., Baldacci, Gupta, and Mati ; Bellas, Papaioannou, and Petrova ; Edwards ; Fouejieu and Roger ) of the main determinants of sovereign spreads. The model is specified as:

{Spread}_{it} = α_{i} + θ_{i} + β X_{it} + ϵ_{it}

where α i is country i 's country fixed effect on the sovereign risk premium, θ i is the time fixed effects, X it is a vector of variables that effects sovereign risk, and ϵ it is a random error term.…”

Section: Data and Methodolgymentioning

confidence: 99%

Fiscal Rules and Government Borrowing Costs: International Evidence

Thornton

Vasilakis

2017

Economic Inquiry

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“…McGuire and Schrijvers (2003) analyze common factors in the movements of spreads, and show that one single factor, highly correlated with the measure of investors' risk tolerance, explains a large share of the spreads' movements. Uribe and Yue (2006) show the importance of global liquidity in the transmission of shocks to EM, while Bellas et al (2010) highlight the role of financial distress in advanced economies. Gonzales-Rosada and Levy-Yeyati (2008) look instead at the impact of a broader set of global factors, which include global risk, global liquidity, and crises in other countries.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Studies that include Total External Debt to GDP are for example,Bellas et al (2010),Akitobi and Stratmann (2008). In a separate set of regressions, we replaced the real time external debt ratio with actual total debt ratio, for which real time data was not available.…”

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confidence: 99%