Sovereign bond markets and financial stability in an emerging economy: an application of directed acyclic graphs and SVAR models
Jorge Ramos-Forero and
Authors registered in the RePEc Author Service: Ligia Melo ()
Macroeconomics and Finance in Emerging Market Economies, 2015, vol. 8, issue 3, 306-319
During the last two decades, domestic government bond markets have developed significantly in emerging economies. Although the financial sector has benefited accordingly, volatility in this market also has posed potential risks in terms of financial stability. This paper uses directed acyclic graphs and structural vector-autoregressive models to evaluate the impact of different shocks on both the public debt market and financial stability. Results suggest that inflation, the policy interest rate and indicators of risk perception are the variables that most affect the slope of the yield curve. In turn, when the slope increases, there is a positive contemporary effect on bank risk indicators.
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Persistent link: https://EconPapers.repec.org/RePEc:taf:macfem:v:8:y:2015:i:3:p:306-319
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