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Dollarization and the relationship between EMBI and fundamentals Latin American countries

María Lorena Mari del Cristo () and Marta Gómez-Puig ()
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María Lorena Mari del Cristo: Department of Economic Theory, Universitat de Barcelona

No 14-05, Working Papers from Asociación Española de Economía y Finanzas Internacionales

Abstract: This paper presents empirical evidence on the interrelationship that exists between the evolution of the Emerging Markets Bonds Index (EMBI) and some macroeconomic variables in seven Latin American countries; two of them (Ecuador and Panama), full dollarized. We make use of a Cointegrated Vector framework to analyze the short run effects from 2001 to 2009. The results suggest that EMBI is more stable in dollarized countries and that its evolution influences economic activity in non-dollarized economies; suggesting that investors confidence might be higher in dollarized countries where real and financial economic evolution are less tied than in non-dollarized ones.

Keywords: Dollarization; emerging markets; Latin American countries; Cointegrated VAR; EMBI; exchange rate regime (search for similar items in EconPapers)
JEL-codes: C32 E44 F30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lam and nep-mac
Date: 2014-02
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Working Paper: Dollarization and the Relationship Between EMBI and Fundamentals Latin American Countries (2014) Downloads
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