Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108063
Authors: 
Ambrus-Lakatos, Lorand
Vilagi, Balazs
Vincze, Janos
Year of Publication: 
2004
Series/Report no.: 
IEHAS Discussion Papers MT-DP - 2004/3
Abstract: 
It is frequently claimed that the expected yield on emerging market bonds commands a premium. Here we investigate the sources of this phe-nomenon. A stochastic general equilibrium model of a small open economy is analyzed numerically to derive conditions for interest rate premia. The novelty of our approach is to attack the problem form the point of view of state dependent policy mixes. The main lessons include: if positive premia were universal, then 1. nominal rigidity should be important, 2. monetary authorities might have a current account stabilization motive, and 3. taste shocks possibly play some role in emerging markets.
Document Type: 
Working Paper

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