Bond risk premia in emerging markets: evidence from Brazil, China, Mexico, and Russia

Leonardo Iania, Marco Lyrio and Rubens Moura

Applied Economics, 2021, vol. 53, issue 58, 6721-6738

Abstract: We employ an affine term structure model with no-arbitrage restrictions and unspanned risk factors to analyse the global and domestic determinants of bond risk premia in four major emerging markets (Brazil, China, Mexico, and Russia). Among the risk factors, we select national inflation and economic growth, and the country-specific nominal exchange rate against the US dollar as the variables related to the domestic economy. We include a measure of worldwide economic activity, the Market Volatility Index (VIX), and an aggregate price index of commodities in the group of global factors. Our model captures (long-term) movements of realized risk premia and indicates that global economic and financial factors play a relevant role in explaining country-specific bond risk premia dynamics. In contrast, domestic variables carry little explanatory power to rationalize risk premia developments in these four economies. We also provide evidence of heterogeneous responses of country-specific risk premia to global and domestic shocks.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2021.1937505 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Bond Risk Premia in Emerging Markets: Evidence from Brazil, China, Mexico, and Russia (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:53:y:2021:i:58:p:6721-6738

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2021.1937505

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().