Information transmission between sovereign debt spreads and economic fundamentals-The case of Latin America

• Main Authors: Wan-HsuanTsai, 蔡宛軒
• Other Authors: Tza-Shr Wang
• Format: Others
• Language: en_US
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/67524916089509463443

碩士 === 國立成功大學 === 財務金融研究所 === 100 === This paper examines the information transmission between sovereign debt spreads and economic fundamentals in the case of five Latin American countries: Argentina, Brazil, Chile, Mexico and Venezuela. We can capture the long-term and short-term relationships between emerging market spreads and fundamental variables by assessing time-series Vector Error Correction Model approach of stationary test, cross correlogram test, cointegration test, Granger causality test, impulse response test and variance decompositions analysis,. Our results show that with the quarterly sample of EMBI spread and eleven determinants, sovereign spreads play the different roles and are not exclusively determined by the same variables in different countries. Besides, for each determinant, the direction and the degree of the effect vary among the countries in our sample. It has proven that for Argentina, the past value of EMBI can predict the current value of CPI. For Brazil, CPI is the leading factor for EMBI while EMBI is the leading factor for trade openness, effective time to maturity and U.S. ten-year government bond rate. For Mexico, CPI is the leading factor for EMBI and has the positive significant explanation in the short run. For Chile and Venezuela, EMBI is the leading factor for U.S. ten-year government bond rate.