What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?

Barry Eichengreen and Ashoka Mody

No 6408, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we analyze data on nearly 1,000 developing-country bonds issued in the years 1991-96 the recent episode of heavy reliance on bonded debt. We analyze both the issue decision of debtors and the pricing decision of investors, minimizing selectivity bias by treating the two issues jointly. Overall, the results confirm that higher credit quality translates into a higher probability of issue and a lower spread. Importantly, however, we find that observed changes in fundamentals explain only a fraction of the spread compression in the period leading up to the recent crisis in emerging markets.

JEL-codes: F3 (search for similar items in EconPapers)
Date: 1998-02
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (271)

Published as Barry Eichengreen & Ashoka Mody, 2000. "What Explains Changing Spreads on Emerging Market Debt?," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 107-136 National Bureau of Economic Research, Inc.

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