{ "title": "Emerging Market Sovereign Bond Spreads: Estimation and Back-testing", "publication": "IMF Working Papers, August 1, 2012", "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/emerging-market-sovereign-bond-spreads-estimation-and-back-testing-26213", "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/31/emerging-market-sovereign-bond-spreads-estimation-and-back-testing-26213", "overlayPath": "/en/publications/wp/issues/2016/12/31/emerging-market-sovereign-bond-spreads-estimation-and-back-testing-26213/index.md", "summary": "We estimate sovereign bond spreads of 28 emerging economies over the period January 1998-December 2011 and test the ability of the model in generating accurate in-sample predictions for emerging economies bond spreads.", "sections": [ { "heading": "Summary", "content": "- Study estimates sovereign bond spreads for 28 emerging economies over the period January 1998-December 2011.\n- Tests the ability of the model to generate accurate in-sample predictions for emerging economies bond spreads.\n- Key comparative methods: rolling regression routines, a linear prediction method, and a random walk (random guessing)." }, { "heading": "Methodology and scope", "content": "- Sample: 28 emerging economies; period: January 1998-December 2011.\n- Frequency: monthly changes in bond spreads examined and predicted.\n- Prediction approaches evaluated:\n - Rolling regression routines (panel/rolling estimation).\n - Linear prediction method.\n - Random walk (benchmark for forecasts)." }, { "heading": "Major findings", "content": "- Heterogeneity of drivers:\n - The impact and significance of country-specific and global explanatory variables on bond spreads varies across regions and economic periods.\n- Crisis vs non-crisis differences:\n - During crisis times, good macroeconomic fundamentals are helpful in containing bond spreads, but less than in non-crisis times, possibly reflecting the impact of extra-economic forces on bond spreads when a financial crisis occurs.\n- Forecasting performance:\n - For some emerging economies, in-sample predictions of the monthly changes in bond spreads obtained with rolling regression routines are significantly more accurate than forecasts obtained with a random walk.\n - Rolling regression-based bond spread predictions appear to convey more information than those obtained with a linear prediction method.\n - Bond spreads forecasts obtained with a linear prediction method are less accurate than those obtained with random guessing." }, { "heading": "Implications for analysis and monitoring", "content": "- Model specification should allow for regional and period-specific variation in explanatory variable significance.\n- Forecasting approaches:\n - Rolling regression routines can provide meaningful improvement in in-sample prediction accuracy for some emerging economies relative to a random walk.\n - Simple linear prediction methods may perform poorly and can be outperformed by random guessing for bond spread forecasts.\n- Crisis-period analysis:\n - Reliance on macroeconomic fundamentals to explain or contain bond spreads during crises may be limited; attention to extra-economic drivers is warranted.\n\n---\n\n Content in this bundle\n\n- wp12212 - Appendix Tables and References\n - wp12212 - Appendix Tables and References (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - wp12212 - Appendix Tables and References (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/emerging-market-sovereign-bond-spreads-estimation-and-back-testing-26213" } ], "bullets": [ "[Markdown version](/en/publications/wp/issues/2016/12/31/emerging-market-sovereign-bond-spreads-estimation-and-back-testing-26213/index.md)", "[Structured JSON version](/en/publications/wp/issues/2016/12/31/emerging-market-sovereign-bond-spreads-estimation-and-back-testing-26213/index.json)", "[Bundle manifest](/en/publications/wp/issues/2016/12/31/emerging-market-sovereign-bond-spreads-estimation-and-back-testing-26213/bundle-manifest.json)", "Authors: Fabio Comelli", "Published: August 1, 2012", "Series: IMF Working Papers", "DOI: https://doi.org/10.5089/9781475505627.001", "Study estimates sovereign bond spreads for 28 emerging economies over the period January 1998-December 2011.", "Tests the ability of the model to generate accurate in-sample predictions for emerging economies bond spreads.", "Key comparative methods: rolling regression routines, a linear prediction method, and a random walk (random guessing).", "Sample: 28 emerging economies; period: January 1998-December 2011.", "Frequency: monthly changes in bond spreads examined and predicted.", "Prediction approaches evaluated:", "Heterogeneity of drivers:", "Crisis vs non-crisis differences:", "Forecasting performance:", "Model specification should allow for regional and period-specific variation in explanatory variable significance.", "Forecasting approaches:", "Crisis-period analysis:", "**_wp12212 - Appendix Tables and References**" ], "related": [ { "title": "_wp12212 - Appendix Tables and References", "role": "document", "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp12212.pdf", "summary": { "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp12212.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2012/_wp12212.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/wp/issues/2016/12/31/emerging-market-sovereign-bond-spreads-estimation-and-back-testing-26213/index.md", "json": "/en/publications/wp/issues/2016/12/31/emerging-market-sovereign-bond-spreads-estimation-and-back-testing-26213/index.json", "bundleManifest": "/en/publications/wp/issues/2016/12/31/emerging-market-sovereign-bond-spreads-estimation-and-back-testing-26213/bundle-manifest.json" }, "generatedAtUtc": "2026-09-17T12:44:53.479Z" }