Sovereign Spreads and Contagion Risks in Asia

Author/Editor:

Filiz D Unsal ; Carlos Caceres

Publication Date:

June 1, 2011

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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 explores how much of the movements in the sovereign spreads of Asian economies over the course of the global financial crisis has reflected shifts in (i) global risk aversion; (ii) country-specific risks, directly from worsening fundamentals, and indirectly from spillovers originating in other sovereigns and the uncertainty surrounding exchange rates. Earlier in the crisis, the increase in market-implied contagion led to higher Asian sovereign bond yield spreads over swaps. But, after the crisis, Asia’s sovereign spreads normalized, despite the debt crisis in the euro area, reflecting a fall in both exchange rate and spillover risks.

Series:

Working Paper No. 11/134

Subject:

English

Publication Date:

June 1, 2011

ISBN/ISSN:

9781455259397/1018-5941

Stock No:

WPIEA2011134

Format:

Paper

Pages:

25

Please address any questions about this title to publications@imf.org