Characterizing Global Investors' Risk Appetite for Emerging Market Debt During Financial Crises

Author/Editor:

Brenda Gonzalez-Hermosillo ; Vance Martin ; Mardi Dungey ; Renee Fry

Publication Date:

December 1, 2003

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The effects of unanticipated movements in global risk on nine emerging bond markets are investigated. The components of global risk are volatility, credit, and liquidity risks. Country and contagion risks are also studied individually. A historical decomposition of bond spreads is used to identify the relative contributions of risk during 1998-99. The empirical results show that the Russian/LTCM crises were characterized by increases in global credit risk, while the relative size of global risk factors was mixed for the Brazilian crisis, with no component dominating. Country risk is found to be important for all countries, while there is little evidence of contagion risk.

Series:

Working Paper No. 2003/251

Subject:

Credit risk Emerging and frontier financial markets Financial crises Financial markets Financial regulation and supervision Financial services Securities markets Yield curve

English

Publication Date:

December 1, 2003

ISBN/ISSN:

9781451875928/1018-5941

Stock No:

WPIEA2512003

Pages:

44

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