Spatial Spillovers in Emerging Market Spreads

Author/Editor:

Salvatore Dell'Erba ; Emanuele Baldacci ; Tigran Poghosyan

Publication Date:

September 1, 2011

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:

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.

Series:

Working Paper No. 11/221

Subject:

English

Publication Date:

September 1, 2011

ISBN/ISSN:

9781463904234/1018-5941

Stock No:

WPIEA2011221

Format:

Paper

Pages:

28

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