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Emerging market sovereign bond spreads: Estimation and back-testing

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  • Comelli, Fabio

Abstract

We estimate sovereign bond spreads of 28 emerging economies over the period January 1998–December 2011 and test the ability of the model in generating accurate in-sample predictions for bond spreads. The impact and significance of explanatory variables on spreads vary across regions and periods. During crisis times, good macroeconomic indicators are helpful in containing spreads, but less than in non-crisis times, possibly reflecting the impact of extra-economic forces on spreads when a financial crisis occurs. For some economies, in-sample predictions of the monthly changes in spreads obtained with rolling regression routines are more accurate than those obtained with random guessing.

Suggested Citation

  • Comelli, Fabio, 2012. "Emerging market sovereign bond spreads: Estimation and back-testing," Emerging Markets Review, Elsevier, vol. 13(4), pages 598-625.
    • Handle: RePEc:eee:ememar:v:13:y:2012:i:4:p:598-625
    DOI: 10.1016/j.ememar.2012.09.002
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    More about this item

    Keywords

    Emerging economies; Sovereign bond yield spreads; In-sample forecasts;
    All these keywords.

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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