Global Monetary Conditions versus Country-Specific Factors in the Determination of Emerging Market Debt Spreads

Dailami, Mansoor ; Masson, Paul R. ; Padou, Jean Jose

World Bank, Washington, DC

关键词: ABATEMENT;    AUTOREGRESSION;    BALANCE OF PAYMENTS;    BANK LOANS;    BANK OF ENGLAND;   

DOI  :  10.1596/1813-9450-3626
RP-ID  :  WPS3626

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

The authors offer evidence that U.S. interest rate policy has an important influence in the determination of credit spreads on emerging market bonds over U.S. benchmark treasuries and therefore on their cost of capital. Their analysis improves on the existing literature and understanding by addressing the dynamics of market expectations in shaping views on interest rate and monetary policy changes and by recognizing nonlinearities in the link between U.S. interest rates and emerging market bond spreads, as the level of interest rates affect the market's perceived probability of default and the solvency of emerging market borrowers. For a country with a moderate level of debt, repayment prospects would remain good in the face of an increase in U.S. interest rates, so there would be little increase in spreads. A country close to the borderline of solvency would face a steeper increase in spreads. Simulations of a 200 basis points (bps) increase in U.S. interest rates show an increase in emerging market spreads ranging from 6 bps to 65 bps, depending on debt/GDP ratios. This would be in addition to the increase in the benchmark U.S. 10 year Treasury rate.