Long Memory in Latin American Sovereign Risk: Daily Evidence on the EMBI

Luis Rodrigo Asturias Schaub, Guglielmo Maria Caporale and Luis Alberiko Gil-Alana

No 12731, CESifo Working Paper Series from CESifo

Abstract: This paper analyses the long-memory properties of sovereign bond spreads in 17 Latin American countries as well as two regional aggregates using daily EMBI (Emerging Markets Bond Index) data from April 2013 to January 2026 (3,163 observations per series). Parametric methods show that all 19 series are characterized by fractional integration with estimated orders ranging from 0.97 (Uruguay) to 1.22 (Honduras) for the log-transformed spreads. Nine series have confidence bounds above unity, indicating that shocks have permanent effects; under autocorrelated errors (as in the Bloomfield model), Uruguay is the only country whose series exhibits mean reversion (as the confidence bands for the fractional parameter are below unity). The results are robust to making different assumptions about the error terms (white noise or autocorrelation) and to allowing for non-linear deterministic trends.

Keywords: long memory; fractional integration; EMBI (Emerging Markets Bond Index); sovereign spreads; Latin America (search for similar items in EconPapers)
JEL-codes: C22 F34 G15 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12731

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