 Modelling sovereign credit spreads with international macro-factors: The case of Brazil 1998–2009Journal of Banking & Finance, 2013, vol. 37, issue 2, 241-256 Abstract: This paper develops a macro-finance model of the Brazilian economy and its sovereign debt markets that allows for domestic and international macroeconomic influences as well as swings in investor confidence. It finds significant evidence of common trends in the US and Brazilian economies and bond markets as well as spillover effects from US inflation and business cycles to the Brazilian economy. The US Fed Funds rate influences Brazilian sovereign spreads, as do Brazilian inflation and policy rates. The Brazilian confidence factor dominates the behavior of the spreads during periods of crisis and we find that it also has a powerful effect on the level and volatility of macroeconomic variables. These results suggest that the macro-finance approach could throw light upon the behavior of other economies that are troubled by sovereign risk. Keywords: Affine term structure model; Macro-finance; Sovereign credit spread; International spillover; Macroeconomic volatility (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:2:p:241-256 DOI: 10.1016/j.jbankfin.2012.08.012 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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