Sovereign Risk: Are the EU's New Member States Different?

17 Pages Posted: 21 Jun 2010

See all articles by David Hauner

David Hauner

International Monetary Fund (IMF) - African Department

Jiri Jonas

International Monetary Fund (IMF)

Manmohan Kumar

International Monetary Fund (IMF) - Research Department

Abstract

This article examines whether rating agencies and investors perceive the sovereign risk of the new member states (NMS) of the European Union (EU) as different from that of other emerging markets. The results suggest the NMS have enjoyed favourable treatment since somewhere between 2002 and 2004, amounting to an advantage of 1.8 notches in ratings and 100 basis points in foreign currency spreads. We argue that, although several explanations of this effect are possible, it is most likely because of higher policy credibility bestowed by EU membership.

Suggested Citation

Hauner, David and Jonas, Jiri and Kumar, Manmohan, Sovereign Risk: Are the EU's New Member States Different?. Oxford Bulletin of Economics and Statistics, Vol. 72, No. 4, pp. 411-427, August 2010. Available at SSRN: https://ssrn.com/abstract=1626527 or http://dx.doi.org/10.1111/j.1468-0084.2010.00589.x

David Hauner (Contact Author)

International Monetary Fund (IMF) - African Department ( email )

1700 19th Street, NW
Washington, DC 20431
United States

Jiri Jonas

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Manmohan Kumar

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-7771 (Phone)
202-589-7771 (Fax)

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