The Determinants of Sovereign Spreads in Emerging Markets

Olcay Çulha, Fatih Ozatay () and Gülbin Şahinbeyoğlu

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: This study analyzes both short-run and long-run determinants of the sovereign spreads in a set of 21 emerging countries over the period 1998-2004 utilizing both daily and monthly data and estimate individual country and panel regressions. Our analysis shows that both domestic and international factors affect spreads, where the most important common determinant of the spreads is found to be the risk appetite of foreign investors. By using an event study methodology we find no evidence of impact of the FOMC announcements on spreads. Finally, we analyze whether news regarding domestic politics and announcements of international organizations play a role in the evolution of spreads. Using the postcrisis data of Turkey, we point out an important effect of such news releases.

Keywords: Bond spreads; emerging markets; Fed announcements; political news (search for similar items in EconPapers)
JEL-codes: E43 E58 F36 G14 G15 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-cwa and nep-fmk
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:0604

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