Sovereign Spreads and Contagion Risks in Asia
IMF Working Papers, June 1, 2011
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Bibliographic details
- Authors: Filiz D Unsal, Carlos Caceres
- Published: June 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455259397.001
Overview and research question
- Authors: Filiz D Unsal, Carlos Caceres
- Publication date: June 1, 2011
- Research focus: Decomposition of movements in Asian sovereign spreads during the global financial crisis into shifts in:
- global risk aversion;
- country-specific risks (directly from worsening fundamentals);
- indirect country-specific risks from spillovers originating in other sovereigns and from uncertainty surrounding exchange rates.
Key findings and empirical results
- Earlier in the crisis:
- The increase in market-implied contagion led to higher Asian sovereign bond yield spreads over swaps.
- After the crisis:
- Asia’s sovereign spreads normalized, despite the debt crisis in the euro area.
- The normalization reflected a fall in both exchange rate risk and spillover risks.
Thematic elements and variables analyzed
- Global and local drivers:
- Global risk aversion.
- Country-specific fundamentals.
- Cross-country spillovers (market-implied contagion).
- Exchange rate uncertainty and exchange rate risk.
- Asset and market measures:
- Sovereign bond yield spreads over swaps.
- Market price of risk and bond yields.
Subject classifications and keywords (as listed)
- Subjects: Bond yields, Currencies, Exchange rate risk, Financial institutions, Financial regulation and supervision, Financial services, Money, Sovereign bonds, Yield curve
- Keywords: Asia and Pacific, bond yield, Bond yields, contagion, Currencies, currency risk, debt ratio, exchange rate, Exchange rate risk, exchange rates, fiscal policy, Global, government bond, government bond bond yield, market price, market price of risk, sovereign bond, sovereign bond bond yield, Sovereign bonds, Sovereign spreads, WP, Yield curve
Content in this bundle
- _wp11134 — Annex III