Sovereign Spreads and Contagion Risks in Asia

Filiz Unsal and Carlos Caceres

No 2011/134, IMF Working Papers from International Monetary Fund

Abstract: This paper explores how much of the movements in the sovereign spreads of Asian economies over the course of the global financial crisis has reflected shifts in (i) global risk aversion; (ii) country-specific risks, directly from worsening fundamentals, and indirectly from spillovers originating in other sovereigns and the uncertainty surrounding exchange rates. Earlier in the crisis, the increase in market-implied contagion led to higher Asian sovereign bond yield spreads over swaps. But, after the crisis, Asia’s sovereign spreads normalized, despite the debt crisis in the euro area, reflecting a fall in both exchange rate and spillover risks.

Keywords: WP; bond yield; exchange rate; government bond; government bond bond yield; sovereign bond; Sovereign spreads; contagion; exchange rates; market price of risk; fiscal policy; currency risk; sovereign bond bond yield; debt ratio; market price; Exchange rate risk; Bond yields; Sovereign bonds; Currencies; Yield curve; Global; Asia and Pacific (search for similar items in EconPapers)
Pages: 25
Date: 2011-06-01
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Citations: View citations in EconPapers (4)

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Journal Article: Sovereign Spreads and Contagion Risks in Asia (2013)
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