THE ROLE OF GLOBAL RISK AVERSION IN EXPLAINING LATIN AMERICAN SOVEREIGN SPREADS

Alicia Garcia Herrero and Alvaro Ortiz

International Finance from University Library of Munich, Germany

Abstract: This paper assesses empirically whether global risk aversion (GRA) and some if its determinants (US economic growth and the US long term interest rates) explain developments in Latin American sovereign spreads. We find that GRA is significant and positively related to Latin American sovereign spreads and that its impact varies across countries and over time. Chile, with a lower sovereign risk, is relatively more affected. The opposite is true for Argentina, Ecuador and Venezuela. In addition, the influence of GRA on spreads has risen since the Enron scandal. Finally, both an increase in US economic growth and US long term interest rates are found to reduce spreads while the opposite is true for US short-term interest rates.

Keywords: global risk aversion; sovereign spreads; Latin America (search for similar items in EconPapers)
JEL-codes: E43 F3 F34 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2005-03-17
New Economics Papers: this item is included in nep-mac
Note: Type of Document - pdf; pages: 51
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Citations: View citations in EconPapers (1)

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https://econwpa.ub.uni-muenchen.de/econ-wp/if/papers/0503/0503005.pdf (application/pdf)

Related works:
Working Paper: The role of global risk aversion in explaining Latin American sovereign spreads (2005)
Working Paper: THE ROLE OF GLOBAL RISK AVERSION IN EXPLAINING LATIN AMERICAN SOVEREIGN SPREADS (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpif:0503005

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