Nonlinear behaviour of EMBI index:the case of eastern European countries

Christian Espinosa-Méndez, Juan Gorigoitia and Carlos Maquieira
Authors registered in the RePEc Author Service: Felipe Balmaceda ()

No 37, Working Papers from Facultad de Economía y Empresa, Universidad Diego Portales

Abstract: Considering the time period from September 2000 to September 2010, we study the nonlinear behaviour of the EMBI index for six emerging Eastern European countries,. Applying the Hinich portmanteau bicorrelation test, the BDS test, the Engle test and Wavelet theory, we observe systematic nonlinear structure in the Embi index at different frequencies. We find evidence that the nonlinearity in full windows is a process that begins from higher and medium frequencies moving towards lower frequencies, that is, from the short term to the long term. Upon analysing the complete series we found windows with evidence of nonlinearity in complete frequency periods, in high frequencies of previous windows that disappear at least one period before, and in high frequencies for periods following a nonlinearity window that do not immediately disappear but maintain part of that nonlinearity in high frequencies in one or more subsequent periods.

Date: 2012-10
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