Bloodshed or Reforms? The Determinants of Sovereign Bond Spreads in 1870-1913 and Today

Nathan Sussman, Yishay Yafeh and Paolo Mauro

No 5528, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Drawing on a newly-collected data set on bond yields, macroeconomic variables, and news of various categories for a panel of emerging markets, we provide the first comparative analysis of the determinants of sovereign bond spreads in the first era of financial globalization and bond finance (1870-1913) and today (1994-2002). We find that news about wars or episodes of politically-motivated violence are a significant and robust determinant of spreads; fiscal variables also play a role; in contrast, news about institutional reforms seldom have a rapid and significant impact. There are also important differences between the two eras: country-specific fundamentals account for a greater share of variation in spreads during the pre-WWI period than today.

Keywords: Emerging markets; Financial globalization; Bond yields (search for similar items in EconPapers)
JEL-codes: F34 G15 N20 (search for similar items in EconPapers)
Date: 2006-03
New Economics Papers: this item is included in nep-fin, nep-fmk, nep-his and nep-hpe
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Citations: View citations in EconPapers (3)

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