Modelling the sovereign linkages of key Latin American economies

Kannan Thuraisamy () and Gerard Gannon

Journal of International Financial Markets, Institutions and Money, 2013, vol. 23, issue C, 222-239

Abstract: This paper models the cross-market dynamics in an emerging market regional setting using a homogenous set of international sovereign bonds issued by key Latin American economies. We employ Johansen's and a modified three-step procedure, which generates portfolio adjustment weights while accounting for common volatility effects across markets. The bonds are grouped based upon maturities across different markets in the Latin American region. This paper provides insights into the nature of sovereign linkages of key Latin American markets generally, and sovereign international bonds with varying maturities more specifically. The empirical results also highlight the manner in which sovereign linkages evolve in Latin America and the required portfolio adjustments following a credit event in the region.

Keywords: Common long-run components; Sovereign linkages; Latin America; Sovereign international bonds; Portfolio adjustment weight (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Working Paper: Modelling the Sovereign Linkages of Key Latin American Economies (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:23:y:2013:i:c:p:222-239

DOI: 10.1016/j.intfin.2012.08.002

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