The Impact of Macroeconomic Announcements on Emerging Market Bonds

Author/Editor:

Jochen R. Andritzky ; Geoffrey J Bannister ; Natalia T. Tamirisa

Publication Date:

April 1, 2005

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:

This paper examines how emerging bond markets react to macroeconomic announcements. Global bond spreads respond to rating actions and changes in global interest rates rather than domestic data and policy announcements. All announcements affect market volatility. Data and policy announcements reduce uncertainty and stabilize the trading environment, while rating actions cause greater volatility. Results are broadly robust to country-specific and panel analyses, assuming conditional variance and controlling for the surprise content of news. In subsamples, announcements are found to matter less for countries with more transparent policies and higher credit ratings. In a crisis, rating actions become less important, and investors focus more on simple and timely indicators, like CPI.

Series:

Working Paper No. 2005/083

Subject:

Emerging and frontier financial markets Fiscal stance Industrial production Short term interest rates Trade balance

English

Publication Date:

April 1, 2005

ISBN/ISSN:

9781451861020/1018-5941

Stock No:

WPIEA2005083

Pages:

31

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