Sovereign Credit and Exchange Rate Risks: Evidence from Asia-Pacific Local Currency Bonds

Mikhail Chernov, Drew Creal and Peter Hördahl

No 27500, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the dynamic properties of sovereign bonds in emerging markets and their associated risk premiums. We focus on the properties of credit spreads, exchange rates, and their interaction. Relying on the term structure of local currency bonds issued by Asia-Pacific sovereigns, we find that local variables are significant in the dynamics of currency and credit risk, and the components of bond risk premiums reflecting these risks. Local currency bonds dramatically improve the investment frontier.

JEL-codes: F31 G12 G15 (search for similar items in EconPapers)
Date: 2020-07
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Published as Mikhail Chernov & Drew Creal & Peter Hördahl, 2022. "Sovereign credit and exchange rate risks: Evidence from Asia-Pacific local currency bonds," Journal of International Economics, .

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Related works:
Journal Article: Sovereign credit and exchange rate risks: Evidence from Asia-Pacific local currency bonds (2023)
Working Paper: Sovereign credit and exchange rate risks: evidence from Asia-Pacific local currency bonds (2021)
Working Paper: Sovereign credit and exchange rate risks: Evidence from Asia-Pacific local currency bonds (2020)
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