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Sovereign spreads in emerging economies: do natural resources matter?

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  • Magali Dauvin

Abstract

Natural resource prices have been plunging since early 2014, constituing a threat to emerging markets whose revenues mainly stem from commodity exports. Within this context, the purpose of this paper is to investigate to what extent commodities are reflected in financial markets assessment of emerging country risk, and if a special premium is added for commodity exporters. We focus on 22 emerging markets sovereign spreads and assess how prices and their commodity trade structure are gauged by investors. Our results indicate that commodity prices are relevant for exporters, as they help relaxing the credit constraint in periods of increasing prices. As for resourcepoor countries, they are of no importance when assessing sovereign risk. Also, global financial markets do not pay attention to dependence on natural resources although they are now suffering from collapsing prices. Finally, high variations in commodity prices are not particularly reflected in the way markets assess sovereign risk.

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  • Magali Dauvin, 2016. "Sovereign spreads in emerging economies: do natural resources matter?," EconomiX Working Papers 2016-11, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2016-11
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    Cited by:

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    2. Donders, Pablo & Jara, Mauricio & Wagner, Rodrigo, 2018. "How sensitive is corporate debt to swings in commodity prices?," Journal of Financial Stability, Elsevier, vol. 39(C), pages 237-258.

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    More about this item

    Keywords

    Sovereign spreads; emerging markets; commodity exporters; commodity prices.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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