Global financing conditions and sovereign debt yields of emerging market countries

Evrim İmer-Ertunga

Applied Financial Economics, 2011, vol. 21, issue 4, 207-215

Abstract: This article provides an analysis for the comovements of global financing conditions and sovereign debt yields of three emerging market countries having huge current account deficits. Instant effects of 10-year government bonds of G-3 countries and the United Kingdom may be important in calculating global financing conditions. Hence, global financing conditions can be derived by an index taking the daily 10-year government bonds of these countries into account. The index may help to understand the global linkages between the advanced and emerging market countries. Both correlation coefficients and univariate Generalized Autoregressive Conditional Heteroscedasticity (GARCH) results exhibit that when global economy was in disarray, advanced economies bond yields tended to fall (due to expectations of low inflation and low growth rate), and emerging bond yields tended to rise (due to global risk aversion). Besides, GARCH (1, 1) results show that the variances of the Hungary, South Africa and Turkey are mainly affected by last day's volatility.

Date: 2011
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DOI: 10.1080/09603107.2010.528363

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