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Determinants of country risk premium revisit: Evidence for emerging market and developing economies

Hiroyuki Taguchi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper aims to revisit the issue on the determinants of the country risk premium for emerging market and developing economies to enrich its empirical evidence. The major contributions of this study to the existing literature are: to sample the majority of emerging market and developing economies by estimating the country risk premium, to focus on the domestic fundamentals rather than the world market factors by targeting the period after the 2000s, and to screen the determinants by the causality check between the country risk premium and its supposed determinants in a vector-autoregressive model framework considering their endogeneity problem. The empirical analyses finally identified the factors of the inflation, the external debt, the public debt and the foreign reserves as the determinants of the country risk premium.

Keywords: country risk premium; emerging market and developing economies; fundamentals; causality; vector-autoregressive model (search for similar items in EconPapers)
JEL-codes: F34 F41 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-tra
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