Characterizing Global Investors' Risk Appetite for Emerging Market Debt During Financial Crises

44 Pages Posted: 27 Jan 2006

See all articles by Mardi Dungey

Mardi Dungey

University of Cambridge - Cambridge Endowment for Research in Finance (CERF)

Renee Fry

Australian National University (ANU) - Department of Economics

Brenda González-Hermosillo

International Monetary Fund; Massachusetts Institute of Technology

Vance L. Martin

University of Melbourne - Department of Economics; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2003

Abstract

The effects of unanticipated movements in global risk on nine emerging bond markets are investigated. The components of global risk are volatility, credit, and liquidity risks. Country and contagion risks are also studied individually. A historical decomposition of bond spreads is used to identify the relative contributions of risk during 1998-99. The empirical results show that the Russian/LTCM crises were characterized by increases in global credit risk, while the relative size of global risk factors was mixed for the Brazilian crisis, with no component dominating. Country risk is found to be important for all countries, while there is little evidence of contagion risk.

Keywords: Risk Aversion, Bond Markets, Financial Crises, SVAR

JEL Classification: C33, E44, F34

Suggested Citation

Dungey, Mardi and Fry, Renee and González-Hermosillo, Brenda and Martin, Vance L., Characterizing Global Investors' Risk Appetite for Emerging Market Debt During Financial Crises (December 2003). IMF Working Paper No. 03/251, Available at SSRN: https://ssrn.com/abstract=879074

Mardi Dungey (Contact Author)

University of Cambridge - Cambridge Endowment for Research in Finance (CERF) ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.dungey.bigpondhosting.com

Renee Fry

Australian National University (ANU) - Department of Economics ( email )

Canberra, Australian Capital Territory 2600
Australia

Brenda González-Hermosillo

International Monetary Fund ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4210 (Phone)
202-589-4210 (Fax)

Massachusetts Institute of Technology ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Vance L. Martin

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

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