The effects of fiscal opacity on sovereign credit spreads

Maurice Peat, Jiri Svec and Jue Wang

Emerging Markets Review, 2015, vol. 24, issue C, 34-45

Abstract: Using the Open Budget Index of 45 advanced and emerging countries and their sovereign credit default swap (CDS) spreads, we find evidence that the sovereign credit market differentiates countries with higher fiscal opacity than others, by way of an opacity premium. We further show that the premium is levied on the entire credit spread term structure but not uniformly over the range of the opacity measure and across countries. While we identify market disciplinary effects on fiscal opacity, it does not replace the need for efforts to set global standards and promote compliance.

Keywords: Sovereign credit risk; Fiscal opacity; Open Budget Index; Sovereign CDS (search for similar items in EconPapers)
JEL-codes: G13 H6 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:24:y:2015:i:c:p:34-45

DOI: 10.1016/j.ememar.2015.05.001

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