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.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 |
| Divisions: | Finance |
| Subjects: | H Social Sciences > HG Finance H Social Sciences > HJ Public Finance |
| JEL classification: | F - International Economics > F3 - International Finance > F34 - International Lending and Debt Problems G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing; Futures Pricing G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets |
| Date Deposited: | 21 Dec 2010 13:14 |
| Last Modified: | 22 Apr 2024 22:18 |
| URI: | http://eprints.lse.ac.uk/id/eprint/31022 |
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