Spatial Spillovers in Emerging Market Spreads

Salvatore Dell'Erba, Emanuele Baldacci and Tigran Poghosyan

No 2011/221, IMF Working Papers from International Monetary Fund

Abstract: We use novel spatial econometrics techniques to explore spillovers in the sovereign bond market for 24 emerging economies during 1995-2010. The paper extends the previous literature focusing on spillover effects from advanced to emerging economies by analyzing transmission of shocks across emerging markets. After controlling for the impact of global factors, we find strong evidence of spillovers from both sovereign spreads and macroeconomic fundamentals in neighboring emerging economies. In addition to the geographical proximity, the channels of spatial transmission include trade and financial linkages. The results of the paper highlight the importance of accounting not only for spillovers from advanced economies to emerging markets, but also across emerging markets when analyzing sovereign spreads.

Keywords: WP; business cycle; debt; EM; sovereign spreads; emerging market; spillovers; spatial econometrics; Ols estimation; stripped bond; EM fundamentals; GDP ratio; EM sovereign; correlation matrix; estimation result; intra-EM spillover; trade linkage; Spatial models; Inflation; Business cycles; Global (search for similar items in EconPapers)
Pages: 28
Date: 2011-09-01
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Citations: View citations in EconPapers (4)

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Journal Article: Spatial spillovers in emerging market spreads (2013)
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