Determinants of Emerging Market Sovereign Bond Spreads: Fundamentals vs Financial Stress

Iva Petrova, Michael Papaioannou and Dimitri Bellas

No 2010/281, IMF Working Papers from International Monetary Fund

Abstract: This paper analyses the determimants of emerging market sovereign bond spreads by examining the short and long-run effects of fundamental (macroeconomic) and temporary (financial market) factors on these spreads. During the current global financial and economic crisis, sovereign bond spreads widened dramatically for both developed and emerging market economies. This deterioration has widely been attributed to rapidly growing public debts and balance sheet risks. Our results indicate that in the long run, fundamentals are significant determinants of emerging market sovereign bond spreads, while in the short run, financial volatility is a more important determinant of sperads than fundamentals indicators.

Keywords: WP; short-term debt; government bond (search for similar items in EconPapers)
Pages: 25
Date: 2010-12-01
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Citations: View citations in EconPapers (109)

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