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Economic complexity and sovereign risk premia

M. Utku Özmen ()
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M. Utku Özmen: Central Bank of the Republic of Turkey

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Economics Bulletin, 2019, vol. 39, issue 3, 1714-1726

Abstract: This paper analyses the impact of economic complexity, measured by the Economic Complexity Index (ECI), on sovereign risk premia. The results reveal that, after controlling for relevant macroeconomic variables, global factors and institutional indicators, economic complexity has a significantly negative impact on sovereign risk premia, captured by sovereign CDS spreads. This finding is valid both for advanced and emerging economies. An economy's ability to produce complex goods, which requires bringing in different sorts of know-how and capabilities together, might serve as an indicator of economy's resilience to shocks and thus, helps reduce the country risk.

Keywords: economic complexity; ECI; risk premia; CDS spreads; emerging economies (search for similar items in EconPapers)
JEL-codes: F4 O1 (search for similar items in EconPapers)
Date: 2019-07-07
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