The Determinants of Country Risk in Eastern European Countries

Kiril Strahilov

No 8, Bruges European Economic Research Papers from European Economic Studies Department, College of Europe

Abstract: The paper studies country risk in two Central and Eastern European countries - Bulgaria and Poland. The long run relationship between the yield differential (spread) of Eastern European national bonds (denominated in US dollars) over a US Treasury bond on one the hand and the country’s fundamentals as well as an US interest rate on the other hand, is examined. The cointegrated VAR model is used. First, the yield differentials are analyzed on a country by country basis to extract stochastic trends which are common for all bonds in a given country. Thereafter, the risk is disentangled into country and higher level risk. This paper is among the first ones which use time series data to study the evidence from sovereign bond spreads in Eastern Europe.

Keywords: sovereign bonds spreads; Brady bonds; cointegration. JEL codes: F34; C32 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2006-11
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:coe:wpbeer:8

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