Global risk aversion and the term premium gap in emerging market economies

Marco Flaccadoro () and Stefania Villa
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Marco Flaccadoro: Bank of Italy

No 1493, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: In this paper we analyze the impact of shocks to global risk aversion on the term structure of sovereign spreads between emerging market economies (EMEs) and the US economy. Focusing on the difference between long- and short-term spreads (i.e. the term premium gap), we find that an increase in global risk aversion reduces the term premium gap. This finding is consistent with the evidence that, during crises, EMEs experience a higher risk of default with respect to safe advanced economies, and to a greater extent at shorter maturities.

Keywords: sovereign bond spreads; emerging markets; risk aversion; term structure (search for similar items in EconPapers)
JEL-codes: E43 F30 G12 G15 (search for similar items in EconPapers)
Date: 2025-10
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