Article ID Journal Published Year Pages File Type
7409449 Journal of Financial Stability 2015 13 Pages PDF
Abstract
This paper investigates the explanatory and forecasting power of macroeconomic fundamentals on emerging market sovereign credit spreads. We pay special attention to a new set of macroeconomic factors related to market values that reflect investor expectations concerning future economic performance. The model we propose captures a significant part of the empirical variation in spreads. Importantly, it also includes a powerful forecasting component that extends up to 12 months outside the sample period. The forward-looking variables that we construct are significant and complement and enhance the explanatory content of the conventional variables found in the extant literature.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics, Econometrics and Finance (General)
Authors
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