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2 edition of Exchange rate policy and sovereign bond spreads in developing countries found in the catalog.

Exchange rate policy and sovereign bond spreads in developing countries

Samir Jahjah

Exchange rate policy and sovereign bond spreads in developing countries

by Samir Jahjah

  • 165 Want to read
  • 24 Currently reading

Published by International Monetary Fund, IMF Institute in [Washington, D.C] .
Written in English

    Subjects:
  • Foreign exchange rates -- Developing countries -- Econometric models.,
  • State bonds -- Developing countries -- Econometric models.

  • Edition Notes

    Statementprepared by Samir Jahjah and Vivian Zhanwei Yue.
    SeriesIMF working paper -- WP/04/210
    ContributionsYue, Vivian Zhanwei., International Monetary Fund., IMF Institute.
    The Physical Object
    Pagination35 p. :
    Number of Pages35
    ID Numbers
    Open LibraryOL21404682M

    In this paper, we investigate the e ect of U.S. unconventional monetary policy announce-ments on sovereign bond yields, foreign exchange rates, and stock prices in 17 EMEs. Our paper makes several empirical contributions to the literature. First, we use the method in. bonds over a relatively long time period, , and covering both developed and developing countries.! The time span covers a period starting when many government bond markets were established, in the early s, to their rapid development thereafter.

    FIGURE Exchange rates and sovereign bond spreads Investor risk aversion spiked in early , amid a renewed decline in commodity prices, leading to sharp increases in sovereign bond spreads and depreciated regional currencies, especially for oil exporters. However since then, nominal exchange rates and bonds spreads.   A one standard deviation increase in sovereign debt corresponds to a 4% increase in loan spreads in countries with no prior default episodes and a 30% increase in countries with a prior default. This finding suggests that lenders perceive the risk associated with public debt to be considerably higher in countries that defaulted in the past, and.

    denominated in US dollars renders countries vulnerable to changing global financial conditions. Changes to the exchange rate and the sovereign bond spread, a measure of domestic financial conditions, closely correlated in emerging Asia in The exchange rate influences financial conditions in. flows to developing countries through international bond, loan and equity markets. Sovereign rating also acts as a ceiling for the foreign currency rating of sub-sovereign borrowers. As of the end of , however, only 86 developing countries have been rated by the rating agencies. Of these, 15 countries have not been rated since


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Exchange rate policy and sovereign bond spreads in developing countries by Samir Jahjah Download PDF EPUB FB2

We test the hypothesis of a link between exchange rate policy and sovereign bonds. We analyze the effect of exchange rate policies on supply and credit spreads of sovereign bonds issued by developing countries.

An exchange rate policy is captured by the de facto exchange rate regime and the real exchange rate misalignment. This paper empirically analyzes how exchange rate policy affects the issuance and pricing of international bonds for developing countries.

We find that countries with less flexible exchange rate regimes pay higher sovereign bond spreads and are less likely to issue bonds.

Exchange Rate Policy and Sovereign Bond Spreads in Developing Countries. Samir Jahjah, Bin Wei, and Vivian Zhanwei Yue. Abstract: This paper empirically analyzes how exchange rate policy affects the issuance and pricing of international bonds for developing by: Downloadable. This paper empirically analyzes how exchange rate policy affects the issuance and pricing of international bonds for developing countries.

We find that countries with less flexible exchange rate regimes pay higher sovereign bond spreads and are less likely to issue bonds. Quantitatively, changing a free-floating regime to a fixed regime decreases the likelihood of bond. Jahjah and Yue () and Barajas et al. () analyze the e¤ect of exchange rate policy on sovereign bond spreads in a more recent context.

In order to capture the exchange rate policy, Jahjah. Downloadable (with restrictions). This paper empirically analyzes how exchange rate policy affects the issuance and pricing of international bonds for developing countries.

We find that countries with less flexible exchange rate regimes pay higher sovereign bond spreads and are less likely to issue bonds. Quantitatively, changing a free-floating regime to a fixed regime decreases the.

This paper empirically analyzes how exchange rate policy affects the issuance and pricing of international bonds for developing countries. We find that countries with less flexible exchange rate regimes pay higher sovereign bond spreads and are less likely to issue bonds.

Quantitatively, changing a free-floating regime to a fixed regime decreases the likelihood of bond issuance by %. BibTeX @INPROCEEDINGS{Jahjah04exchangerate, author = {Samir Jahjah and Bin Wei and Vivian Zhanwei Yue and Samir Jahjah and Bin Wei and Vivian Zhanwei Yue and Frank Diebold and Charles Engel and Neil Ericsson and Mark Gertler and Martin Uribe and Jenny Xu and The Participants}, title = {Exchange rate policy and sovereign bond spreads in developing countries}, booktitle = {IMF.

interaction between the exchange rate policy and misalignment affects the supply curve and pricing of sovereign bonds.

We conduct an empirical analysis using data on 51 developing countries. Our study reveals the link between exchange rate policy and sovereign bond spreads. The main findings are. In this paper, we investigate the impacts of exchange rate policy on sovereign bond spreads using data on bonds issued by 51 developing countries between and Analyzing.

Exchange-Rate Policy for Developing Countries ied by the spreads on sovereign bonds) has not been much lower for Argentina, in spite of its currency board. In contrast, country risk dimin-ished for Brazil after the advent of floating. This issue clearly warrants further research. This paper conducts an empirical test on dollar-denominated sovereign credit spreads in emerging markets, such as the Philippines, to examine their relationship with each country’s exchange rate and the United States Treasury yields.

Over the past decade or so, a number of low-income developing countries (LIDCs) 1 have issued sovereign bonds in the international capital markets, driven in part by African frontier markets.

2 Given the declining trend of aid flows, 3 sovereign bonds could represent a sizeable source of external finance, which can contribute to the financing of investment projects, helping LIDCs make.

We analyze the effect of exchange rate policies on supply and credit spreads of sovereign bonds issued by developing countries. An exchange rate policy is captured by the de facto exchange rate regime and the real exchange rate misalignment. The main findings are: (1) real exchange rate overvaluation significantly increases sovereign bond issue.

Spreads on sovereign bonds are lower for countries with strong external and fiscal positions, as well as robust economic growth and government effectiveness.

With regard to global factors, the results show that sovereign bond spreads are reduced in periods of lower market volatility. JEL Classification Numbers: F34; G12; G15; O This paper evaluates the influence of the exchange rate policy on the emission of foreign currency sovereign bonds in emerging markets.

The relationship is estimated using panel data and GMM approach, with exchange rate regime type (both de jure and de facto) and real exchange rate volatility serving as explanatory variables.

Since Maythe U.S. dollar’s trade-weighted exchange rate has been slowly rising, reflecting the Federal Reserve’s gradual tightening of monetary policy. 1 But this gentle increase conceals a more volatile picture for the currency exchange rates of many developing countries, particularly those with large trade deficits.

Consequently, FX risk is rising for U.S. businesses trading with. Sovereign bond yield is the interest rate paid on a government (sovereign) bond. In other words, it is the rate of interest at which a national government can borrow.

Sovereign bonds in developing countries: Drivers of issuance and spreads Article (PDF Available) in Review of Development Finance 6(1) August with Reads How we measure 'reads'. Bond spreads for developing countries (i.e. yield difference with year U.S. Treasury bonds) have narrowed, bringing down average borrowing sovereign bond markets, pushing down long-term inter- bond spreads and exchange rates across 45 developing- and 35 high-income countries.

3 hours ago  These variables include the share of foreign holdings of bonos, the Mexican peso–U.S. dollar exchange rate, an index for emerging market sovereign bond yields, oil prices, the year-over-year change in the Mexican consumer price index, the Mexican public debt-to-GDP ratio, the average bid-ask spread in the bonos market, and the one-month cetes.countries with large reserves (Europe in ), it is evenmore true for middle- income, reserve-constrained, developing countries.

But the new exchange rate orthodoxy also leaves a great deal to be desired. Its empirical foundations, for one, are weak. A good deal of the current enthusiasm for. The European sovereign debt crisis was a period when several European countries experienced the collapse of financial institutions, high government debt, and rapidly rising bond yield spreads .