Sovereign Risk Matters: The Effects of Endogenous Default Risk on the Time-Varying Volatility of Interest Rate Spreads

Autor:	Sergio de Ferra, Enrico Mallucci
Rok vydání:	2020
Předmět:	Sovereign default media_common.quotation_subject Economics Econometrics Default risk Balance of trade Baseline model Volatility (finance) Emerging markets Credit risk Interest rate media_common
Zdroj:	International Finance Discussion Paper. 2020
ISSN:	1073-2500
DOI:	10.17016/ifdp.2020.1276
Popis:	Emerging market interest rate spreads display substantial time-varying volatility. We show that a baseline model with endogenous sovereign default risk can account for such volatility, even in the absence of shocks to the second moments of the exogenous stochastic variables. In particular, the model features a key non-linearity that allows it to replicate the volatility of interest rate spreads and its comovement with other economic variables. Volatility correlates positively with the level of the spreads and the trade balance and negatively with output and consumption.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::a49e5f0ddb79d93dcbd7e47c7af7c4bd https://doi.org/10.17016/ifdp.2020.1276 Zobrazit plný text záznamu