Emerging market sovereign bond spreads,credit ratings and global financial crisis |
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| Institution: | 1. Middle East Technical University, Department of Economics, Ankara, Turkey;2. Central Bank of the Republic of Turkey, Ankara, Turkey;1. Department of Statistics and Quantitative Methods, University of Milano-Bicocca, Piazza dell’Ateneo Nuovo 1, 20126 Milano, Italy;2. CNRS, Centre d’Economie de la Sorbonne, Université Paris I Panthéon-Sorbonne, Maison des Sciences Economiques, 106-112 Boulevard de l’Hôpital 75647 Paris Cedex 13, France;3. Department of Methods and Models for Economics, Environment and Finance Sapienza University of Rome, via del Castro Laurenziano 9, Rome 00161, Italy;1. China Institute for Actuarial Science, Central University of Finance and Economics, Beijing 100081, PR China;2. School of Management, University of China Academy of Sciences, Beijing 100190, PR China;3. Department of Applied Finance and Actuarial Studies, Faculty of Business and Economics, Macquarie University, Sydney, NSW 2109, Australia;1. School of Business Administration, South China University of Technology, Guangzhou 510640, China;2. Business School, Chinese University of Hong Kong, Shatin, NT, Hong Kong |
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| Abstract: | This paper investigates the impacts of sovereign credit ratings and global financial conditions on the evolution of EMBI Global (EMBIG) spreads for a panel of 23 developing countries by using daily data for the period between 1998 and 2012. To this end, we employ not only the conventional panel estimation procedures, but also the recent methods tackling with either cross-sectional dependence stemming from common global shocks or a potential endogeneity. Our results suggest that credit ratings along with global financial conditions re the main determinants of EMBIG spreads. The determinants of EMBIG spreads are not invariant to speculative and investment grade episodes and transitions between them. The recent global crisis changed the determinants of EMBIG spreads and led to credit ratings' impact to converge between speculative and investment grade countries. |
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