Global Financial Spillovers to Emerging Market Sovereign Bond Markets

Author/Editor:

Christian H Ebeke ; Annette J Kyobe

Publication Date:

June 26, 2015

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Foreign holdings of emerging markets (EMs) government bonds have increased substantially over the last decade. While foreign participation in local-currency sovereign bond markets provides an additional source of financing and reduces sovereign yields, it raises concerns about increased sensitivity of yields to shifts in market sentiment. The analysis in this paper suggests that foreign participation and an undiversified investor base transmit global financial shocks to local-currency sovereign bond markets by increasing yield volatility and, beyond a certain threshold, amplify these spillovers. These estimates are robust to a range of econometric techniques including panel smooth threshold regression.

Series:

Working Paper No. 15/141

Subject:

English

Publication Date:

June 26, 2015

ISBN/ISSN:

9781513552750/1018-5941

Stock No:

WPIEA2015141

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

22

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