Macroeconomic effects on emerging-markets sovereign credit spreads

Ephraim Clark and Konstantinos Kassimatis

Journal of Financial Stability, 2015, vol. 20, issue C, 1-13

Abstract: This paper investigates the explanatory and forecasting power of macroeconomic fundamentals on emerging market sovereign credit spreads. We pay special attention to a new set of macroeconomic factors related to market values that reflect investor expectations concerning future economic performance. The model we propose captures a significant part of the empirical variation in spreads. Importantly, it also includes a powerful forecasting component that extends up to 12 months outside the sample period. The forward-looking variables that we construct are significant and complement and enhance the explanatory content of the conventional variables found in the extant literature.

Keywords: Sovereign spreads; Credit risk; Country market value (search for similar items in EconPapers)
JEL-codes: F34 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:20:y:2015:i:c:p:1-13

DOI: 10.1016/j.jfs.2015.06.002

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