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Spatial Spillovers in Emerging Market Spreads

Author/Editor: Baldacci, Emanuele | Dell'Erba, Salvatore | Poghosyan, Tigran
Authorized for Distribution: September 1, 2011
Electronic Access: Free Full Text (PDF file size is 1,049KB)
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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: We use novel spatial econometrics techniques to explore spillovers in the sovereign bond market for 24 emerging economies during 1995-2010. The paper extends the previous literature focusing on spillover effects from advanced to emerging economies by analyzing transmission of shocks across emerging markets. After controlling for the impact of global factors, we find strong evidence of spillovers from both sovereign spreads and macroeconomic fundamentals in neighboring emerging economies. In addition to the geographical proximity, the channels of spatial transmission include trade and financial linkages. The results of the paper highlight the importance of accounting not only for spillovers from advanced economies to emerging markets, but also across emerging markets when analyzing sovereign spreads.
 
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Series: Working Paper No. 11/221
Subject(s): Bond markets | Bonds | Developed countries | Economic models | Emerging markets | External debt | Financial crisis | Global Financial Crisis 2008-2009 | Sovereign debt | Spillovers
Author's keyword(s): sovereign spreads | emerging market | spillovers | spatial econometrics
 
English  
    Published:   September 1, 2011        
            Format:   Paper
    Stock No:   WPIEA2011221   Pages:   28
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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