Monetary policy and country risk

Vladimir Teles () and Joaquim Pinto de Andrade

No 223, Textos para discussão from FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil)

Abstract: This article develops an econometric model in order to study country risk behavior for six emerging economies (Argentina, Mexico, Russia, Thailand, Korea and Indonesia), by expanding the Country Beta Risk Model of Harvey and Zhou (1993), Erb et. al. (1996a, 1996b) and Gangemi et. al. (2000). Toward this end, we have analyzed the impact of macroeconomic variables, especially monetary policy, upon country risk, by way of a time varying parameter approach. The results indicate an inefficient and unstable effect of monetary policy upon country risk in periods of crisis. However, this effect is stable in other periods, and the Favero-Giavazzi effect is not verified for all economies, with an opposite effect being observed in many cases.

Date: 2010-06-29
New Economics Papers: this item is included in nep-cba, nep-mon and nep-sea
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Journal Article: Monetary policy and country risk (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:eesptd:223

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