On Emerging Economy Sovereign Spreads and Ratings

Andrew Powell and Juan F. Martinez S.

No 4565, Research Department Publications from Inter-American Development Bank, Research Department

Abstract: This paper analyzes alternative models for emerging sovereign ratings. Although a small number of economic fundamentals explain ratings reasonably well, variations in those economic fundamentals are themselves explained by a small number of world factors. On the other hand, global financial variables associated with risk aversion are additionally required in order to explain the significant spread compression at the end of 2006. To determine whether ratings matter for spreads, the paper compares results across different methodologies, in particular exploiting differences in opinion between rating agencies. The evidence from this and previous methodologies is that ratings do matter. Finally, the paper finds that global indicators of risk aversion have become less important for emerging market spreads and that the effect of sub-prime news is less than the effect of “average news” on emerging economy credit default swap (CDS) spreads.

Date: 2008-01
New Economics Papers: this item is included in nep-dev
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://www.iadb.org/research/pub_hits.cfm?pub_id=W ... e_name=pubWP-629.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.iadb.org/research/pub_hits.cfm?pub_id=WP-629&pub_file_name=pubWP-629.pdf [301 Moved Permanently]--> https://www.iadb.org/research/pub_hits.cfm?pub_id=WP-629&pub_file_name=pubWP-629.pdf)

Related works:
Working Paper: On Emerging Economy Sovereign Spreads and Ratings (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:idb:wpaper:4565

Access Statistics for this paper

More papers in Research Department Publications from Inter-American Development Bank, Research Department Contact information at EDIRC.
Bibliographic data for series maintained by Felipe Herrera Library ().