Global Factors and Emerging Market Spreads

CIF Working Paper No. 07/2005

47 Pages Posted: 2 Jan 2006

See all articles by Martín González-Rozada

Martín González-Rozada

Universidad Torcuato Di Tella

Eduardo Levy Levy-Yeyati

Universidad Torcuato Di Tella - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 2005


This paper shows that a large fraction of the variability of emerging market bond spreads is explained by the evolution of global factors such as risk appetite (as reflected in the spread of high yield corporate bonds in developed markets), global liquidity (measured by the international interest rates) and contagion (from systemic events like the Russian default). This link has remained relatively stable over the history of the emerging market class, is robust to the inclusion of country-specific factors, and helps provide accurate long-run predictions. Overall, the results highlight the critical role played by exogenous factors in the evolution of the borrowing cost faced by emerging economies.

Keywords: Sovereign Spreads, Risk Appetite, Global Liquidity, Emerging Markets

JEL Classification: F34, E43, G15

Suggested Citation

González Rozada, Martín and Levy-Yeyati, Eduardo Levy, Global Factors and Emerging Market Spreads (December 2005). CIF Working Paper No. 07/2005, Available at SSRN: or

Martín González Rozada

Universidad Torcuato Di Tella ( email )

Saenz Valiente 1010
Buenos Aires, C1428BIJ
5411 51697318 (Phone)


Eduardo Levy Levy-Yeyati (Contact Author)

Universidad Torcuato Di Tella - School of Business ( email )

Saenz Valiente 1010
C1428BIJ Buenos Aires

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