Emerging Market Yield Spreads: Domestic, External Determinants, and Volatility Spillovers

Abstract:     
This study examines the determinants of bond yield spreads for 22 emerging markets in the period 1998-2009. Several determinants are considered. In addition, I consider the connection between volatility and bond yield spreads. Volatility and central bank transparency are two factors common to all countries examined whereas clear idiosyncrasies are found according to whether emerging markets are in Latin and South America, Europe, Asia or Africa. Most notably, the global financial crisis raised yield spreads, except in Asia, which suggests that, in a sense, bond markets in that region were decoupled from those in other parts of the world.

Keywords: emerging markets, yield spreads, volatility, transparency

JEL Classification: G15, C2, F34, F44

Accepted Paper Series