Cookies?
Library Header Image
LSE Research Online LSE Library Services

Determinants of sovereign risk: macroeconomic fundamentals and the pricing of sovereign debt

Hilscher, Jens and Nosbusch, Yves (2010) Determinants of sovereign risk: macroeconomic fundamentals and the pricing of sovereign debt. Review of Finance, 14 (2). pp. 235-262. ISSN 1572-3097

Full text not available from this repository.

Identification Number: 10.1093/rof/rfq005

Abstract

This paper investigates the effects of macroeconomic fundamentals on emerging market sovereign credit spreads. We find that the volatility of terms of trade in particular has a statistically and economically significant effect on spreads. This is robust to instrumenting terms of trade with a country-specific commodity price index. Our measures of country fundamentals have substantial explanatory power, even controlling for global factors and credit ratings. We also estimate default probabilities in a hazard model and find that model implied spreads capture a significant part of the variation in observed spreads out-of-sample. The fit is better for lower credit quality borrowers.

Item Type: Article
Official URL: http://rof.oxfordjournals.org/
Additional Information: © 2010 The Authors
Subjects: H Social Sciences > HG Finance
H Social Sciences > HJ Public Finance
Sets: Departments > Finance
Date Deposited: 21 Dec 2010 13:14
Last Modified: 24 Jan 2013 15:45
URI: http://eprints.lse.ac.uk/id/eprint/31022

Actions (login required)

View Item View Item