The EMBI in Latin America: Fractional Integration, Non-Linearities and Breaks

21 Pages Posted: 22 Dec 2015

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Hector Carcel

University of Navarra - School of Economics

Luis A. Gil-Alana

University of Navarra - Department of Economics

Date Written: November 30, 2015

Abstract

This paper analyses the main statistical properties of the Emerging Market Bond Index (EMBI), namely long-range dependence or persistence, non-linearities, and structural breaks, in four Latin American countries (Argentina, Brazil, Mexico, Venezuela). For this purpose it uses a fractional integration framework and both parametric and semi-parametric methods. The evidence based on the former is sensitive to the specification for the error terms, whilst the results from the latter are more conclusive in ruling out mean reversion. Further, non-linearities do not appear to be present. Both recursive and rolling window methods identify a number of breaks. Overall, the evidence of long-range dependence as well as breaks suggests that active policies might be necessary for achieving financial and economic stability in these countries.

Keywords: emerging markets, EMBI, fractional integration, non-linearities

JEL Classification: C220, G120, F630

Suggested Citation

Caporale, Guglielmo Maria and Carcel, Hector and Gil-Alana, Luis A., The EMBI in Latin America: Fractional Integration, Non-Linearities and Breaks (November 30, 2015). CESifo Working Paper Series No. 5630, Available at SSRN: https://ssrn.com/abstract=2706515

Guglielmo Maria Caporale (Contact Author)

Brunel University London - Department of Economics and Finance ( email )

Kingston Lane
Marie Jahoda Building
Uxbridge, Middlesex UB8 3PH
United Kingdom
+44 1895 266713 (Phone)
+44 1895 269770 (Fax)

HOME PAGE: http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/ef_staff/guglielmocaporale/

London South Bank University ( email )

Centre for Monetary and Financial Economics
London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Hector Carcel

University of Navarra - School of Economics ( email )

Universidad de Navarra
Campus Universitario
Pamplona, 31009
Spain

Luis A. Gil-Alana

University of Navarra - Department of Economics ( email )

Campus de Arrosadia
Pamplona, 31006
Spain

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
14
Abstract Views
389
PlumX Metrics