Correlations in Emerging Market Bonds : The Role of Local and Global Factors

Author/Editor:

A. J Hamann ; Irina Bunda ; Subir Lall

Publication Date:

January 1, 2010

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:

This paper examines the comovement in emerging market bond returns and disentangles the influence of external and domestic factors. The conceptual framework, set in the context of asset allocation, allows us to describe the channels through which shocks originating in a particular emerging or mature market are transmitted across countries and markets. We show that using a simple measure of cross-country correlations together with the commonly used average correlation coefficient can be more informative during episodes of heightened market instability. Data for the period 1997-2008 are analyzed for evidence of true contagion and common external shocks.

Series:

Working Paper No. 10/6

Subject:

Frequency:

Monthly

English

Publication Date:

January 1, 2010

ISBN/ISSN:

9781451961775/1018-5941

Stock No:

WPIEA2010006

Format:

Paper

Pages:

27

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