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Determinants of Bulgarian Brady bond prices - an empirical assessment

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  • Budina, Nina
  • Mantchev, Tzvetan

Abstract

To analyze the main determinants of secondary market prices of Bulgarian Brady Bonds, the authors investigate to what extent fluctuations in domestic fundamentals affect the bonds'secondary market price. They also assess the extent to which external shocks affect the bonds'prices. They estimate the long-term relationship between domestic fundamentals and market prices of bonds, using co-integration techniques. In the long-run, they find that gross foreign reserves and exports had a positive effect on bond prices and the real exchange rate and Mexico's nominal exchange rate depreciation had a negative effect. In the short run, the Asian crisis had a negative impact, and Bulgaria's change in political regime and introduction of a currency board had a positive impact. Mexico's economic crisis in 1995 had contagion effects. The authors'empirical results confirm the view that the so-called fundamentals approach should be used to supplement the analysis of spillover effects for Bulgaria Brady bonds.

Suggested Citation

  • Budina, Nina & Mantchev, Tzvetan, 2000. "Determinants of Bulgarian Brady bond prices - an empirical assessment," Policy Research Working Paper Series 2277, The World Bank.
    • Handle: RePEc:wbk:wbrwps:2277
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    2. Stijn Claessens & Sweder van Wijnbergen, 1993. "Secondary Market Prices and Mexico's Brady Deal," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(4), pages 965-982.
    3. Barbone, Luca & Forni, Lorenzo, 1997. "Are markets learning? : behavior in the secondary market for Brady bonds," Policy Research Working Paper Series 1734, The World Bank.
    4. Eaton, Jonathan, 1990. "Debt Relief and the International Enforcement of Loan Contracts," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 43-56, Winter.
    5. Peter Boswijk, H., 1994. "Testing for an unstable root in conditional and structural error correction models," Journal of Econometrics, Elsevier, vol. 63(1), pages 37-60, July.
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    Cited by:

    1. Peter Rowland, 2004. "The Colombian Sovereign Spread and its Determinants," Borradores de Economia 315, Banco de la Republica de Colombia.
    2. Peter Rowland & José Luis Torres Trespalacios, 2004. "Determinants Of Spread And Creditworthiness For Emerging Market Sovereign Debt: A Panel Data Study," Borradores de Economia 2337, Banco de la Republica.
    3. Peter Rowland, 2004. "Determinants Of Spread , Credit Rating And Creditworthiness For Emerging Market Sovereign Debt: A Panel Data Study," Borradores de Economia 2336, Banco de la Republica.
    4. Peter Rowland, 2005. "Buyback of Colombian Sovereign Debt," Borradores de Economia 331, Banco de la Republica de Colombia.
    5. Osama M. Badr & Ahmed F. El-khadrawi, 2016. "Macroeconomic Variables, Government Effectiveness and Sovereign Credit Rating: A Case of Egypt," Applied Economics and Finance, Redfame publishing, vol. 3(4), pages 29-36, November.
    6. Peter Rowland, 2004. "The Colombian Sovereign Spread And Its Determinants," Borradores de Economia 3572, Banco de la Republica.
    7. Peter Rowland, 2004. "Determinants of Spread and Credit Ratings and Creditworthiness for Emerging Market Sovereign Debt: A Follow-Up Study Using Pooled Data Analysis," Borradores de Economia 296, Banco de la Republica de Colombia.
    8. Peter Rowland, 2005. "Buyback Of Colombian Sovereign Debt," Borradores de Economia 2073, Banco de la Republica.
    9. Ni, Yinan & Barth, James R. & Sun, Yanfei, 2022. "On the dynamic capital structure of nations: Theory and empirics," Research in International Business and Finance, Elsevier, vol. 62(C).

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