The role of global risk aversion in explaining Latin American sovereign spreads

Alicia García-Herrero () and Alvaro Ortiz
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Alicia García-Herrero: Banco de España
Authors registered in the RePEc Author Service: Alicia Garcia Herrero

No 505, Working Papers from Banco de España

Abstract: This paper assesses empirically whether global risk aversion (GRA) and some if its determinants (US economic growth and the US long term interest rates) explain developments in Latin American sovereign spreads. We find that GRA is significant and positively related to Latin American sovereign spreads and that its impact varies across countries and over time. Chile, with a lower sovereign risk, is relatively more affected. The opposite is true for Argentina, Ecuador and Venezuela. In addition, the influence of GRA on spreads has risen since the Enron scandal. Finally, both an increase in US economic growth and US long term interest rates are found to reduce spreads while the opposite is true for US short term interest rates.

Keywords: global risk aversion; sovereign spreads; latin america (search for similar items in EconPapers)
JEL-codes: E43 F3 F34 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2005-02
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Citations: View citations in EconPapers (11)

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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/05/Fic/dt0505e.pdf First version, February 2005 (application/pdf)

Related works:
Working Paper: THE ROLE OF GLOBAL RISK AVERSION IN EXPLAINING LATIN AMERICAN SOVEREIGN SPREADS (2005)
Working Paper: THE ROLE OF GLOBAL RISK AVERSION IN EXPLAINING LATIN AMERICAN SOVEREIGN SPREADS (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0505

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