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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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