Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25374
Authors: 
Beck, Roland
Year of Publication: 
2001
Series/Report no.: 
CFS Working Paper 2001/02
Abstract: 
This paper shows that emerging market eurobond spreads after the Asian crisis can be almost completely explained by market expectations about macroeconomic fundamentals and international interest rates. Contrary to the claim that emerging market bond spreads are driven by market variables such as stock market volatility in the developed countries, it is found that this did not play a significant role after the Asian crisis. Using panel data techniques, it is shown that the determinants of bond spreads can be divided into long-term structural variables and medium-term variables which explain month-to-month changes in bond spreads. As relevant medium-term variables, ''consensus forecasts'' of real GDP growth and inflation, and international interest rates are identified. The long-term structural factors do not explicitly enter the model and show up as fixed or random country-specific effects. These intercepts are highly correlated with the countries' credit rating.
Subjects: 
Emerging Markets
Bond Spreads
JEL: 
F34
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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