2017
DOI: 10.1016/j.cesjef.2016.10.002
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Dollarization and the relationship between EMBI and fundamentals in Latin American Countries

Abstract: This paper presents empirical evidence on the interrelationship that exists between the evolution of the Emerging Markets Bonds Index (EMBI) and some macroeconomic variables in seven Latin American countries; two of them (Ecuador and Panama), full dollarized. We make use of a Cointegrated Vector framework to analyze the short run effects from 2001 to 2009. The results suggest that EMBI is more stable in dollarized countries and that its evolution influences economic activity in non-dollarized economies; sugges… Show more

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Cited by 7 publications
(2 citation statements)
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References 23 publications
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“…The macroeconomic fundamentals are the bedrock upon which sovereign risk assessments are built and determine the ability of a country to adjust to negative shocks (Aizenman, Jinjarak and Park, 2016). Robust economic growth, low inflation rates, debt-to-GDP ratio reduction, and a sustainable fiscal sector and policies together form a picture of an economy's strength, its government's capacity to service debt, and the performance of sovereign spreads (Nogués and Grandes, 2001;del Cristo and Gómez-Puig, 2017;Edwards, 1986). For example, Baldacci, Gupta and Mati (2011) find that the composition of fiscal policy matters, as higher public investment can lower sovereign spreads, as long as the government's financial situation is sustainable and does not show a deficit.…”
Section: Political and Macroeconomic Fundamentalsmentioning
confidence: 99%
“…The macroeconomic fundamentals are the bedrock upon which sovereign risk assessments are built and determine the ability of a country to adjust to negative shocks (Aizenman, Jinjarak and Park, 2016). Robust economic growth, low inflation rates, debt-to-GDP ratio reduction, and a sustainable fiscal sector and policies together form a picture of an economy's strength, its government's capacity to service debt, and the performance of sovereign spreads (Nogués and Grandes, 2001;del Cristo and Gómez-Puig, 2017;Edwards, 1986). For example, Baldacci, Gupta and Mati (2011) find that the composition of fiscal policy matters, as higher public investment can lower sovereign spreads, as long as the government's financial situation is sustainable and does not show a deficit.…”
Section: Political and Macroeconomic Fundamentalsmentioning
confidence: 99%
“…As classified by Mari Del Cristo and Gómez-Puig (2017), research attempting to identify the causes of country risk fall under three categories. In the first category, macroeconomic and political variables act as determinants of country risk, the second category emphasizes exogenous factors (such as market or investor sentiment, contagion effects, capital flows) as determinants, and the third and final group emphasize exchange rate regime as a determinant of country risk.…”
Section: Introductionmentioning
confidence: 99%