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The credit spread dynamics of Latin American euro issues in international bond markets
journal contribution
posted on 2008-10-01, 00:00 authored by Kannan ThuraisamyKannan Thuraisamy, Gerard Gannon, J BattenThis paper investigates two important relationships using the sovereign issues made by major Latin American economies in the international bond market: the determinants of credit spread changes using variables derived from structural and macroeconomic theory and the impact of a default episode on the underlying equilibrium dynamics. We find four significant determinants of credit spread changes: an asset and interest rate factor—consistent with structural models of credit spread pricing; the exchange rate—consistent with macroeconomic determinants and the slope of the yield curve—consistent with a business cycle effect. Also, an intra-regional analysis of sovereign yields reveals a shift in the long-run equilibrium dynamics around the Argentine default on the 23 December 2001.
History
Journal
Journal of multinational financial managementVolume
18Issue
4Pagination
328 - 345Publisher
Elsevier B.V.Location
Amsterdam, The NetherlandsPublisher DOI
ISSN
1042-444XLanguage
engPublication classification
C1 Refereed article in a scholarly journalCopyright notice
2008, Elsevier B.V.Usage metrics
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No categories selectedKeywords
credit spreadsLatin Americalong-run dynamicssovereign bondsstructural modelsSocial SciencesBusiness, FinanceBusiness & Economicscredit spreads long-run dynamics Latin America sovereign bonds cointegration G15 International Financial Markets RePEc:dkn:acctwp:aef_2007_12 RePEc:dkn:econwp:aef_2007_12G15cointegration
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