Different no more: Country spreads in advanced and emerging economies

Benjamin Born, Müller, Gernot, Johannes Pfeifer and Susanne Wellmann
Authors registered in the RePEc Author Service: Gernot J. Müller

No 14392, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Interest rate spreads vary widely across time and countries and are a central driver of business cycles in emerging market economies (EMEs). Since 2008, advanced market economies (AMEs) have exhibited persistently higher and more volatile spreads, alongside increased macroeconomic volatility and stronger co-movement with EMEs. We document six facts showing that AMEs have become more similar to EMEs along key dimensions. We interpret these patterns through a small open economy model and uncover a stark dichotomy: higher spreads reflect greater indebtedness and lower debt tolerance, whereas greater macroeconomic volatility and co-movement are driven by stronger global shocks.

Keywords: Country spreads; Country risk; Interest-rate shocks; Business cycle; Public debt; Financial frictions (search for similar items in EconPapers)
JEL-codes: E32 F41 G15 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-ifn, nep-mac and nep-opm
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Different No More: Country Spreads in Advanced and Emerging Economies (2026)
Working Paper: Different No More: Country Spreads in Advanced and Emerging Economies (2020)
Working Paper: Different no more: Country spreads in advanced and emerging economies (2020)
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