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Long- and Short-run Determinants of Original Sinners’ Sovereign Spreads


Tkalec, Marina; Miroslav Verbič; Vizek Maruška
Long- and Short-run Determinants of Original Sinners’ Sovereign Spreads // 19th Dubrovnik Economic Conference, Young Economists´ Seminar
Dubrovnik, Hrvatska, 2013. (pozvano predavanje, međunarodna recenzija, neobjavljeni rad, znanstveni)


Naslov
Long- and Short-run Determinants of Original Sinners’ Sovereign Spreads

Autori
Tkalec, Marina ; Miroslav Verbič ; Vizek Maruška

Vrsta, podvrsta i kategorija rada
Sažeci sa skupova, neobjavljeni rad, znanstveni

Skup
19th Dubrovnik Economic Conference, Young Economists´ Seminar

Mjesto i datum
Dubrovnik, Hrvatska, 12.-14.6.2013

Vrsta sudjelovanja
Pozvano predavanje

Vrsta recenzije
Međunarodna recenzija

Ključne riječi
Balance sheet effect; emerging Europe; euroization; original sin; sovereign spreads

Sažetak
This paper builds an empirical model of sovereign spreads and its determinants, relying on recent theories on imperfect capital markets and balance sheet effects. We investigate nine European emerging economies that suffer from the “original sin”, over the period 2001-2011, using dynamic panel error correction models proposed by Pesaran et al. (1999). This methodology improves estimation efficiency and model performance, but it also allows differentiation between long-run and short-run spread determinants. We find that in the long-run, sovereign spreads increase in response to a higher share of external debt in GDP, while they move in the opposite direction when the shares of current account and international reserves in GDP rise. In the short-run, sovereign spreads deviate from the long-run equilibrium, with half of the adjustment taking place in eight months. Our results suggest that in the short-run, higher external debt service caused by exchange rate depreciation, i.e. balance sheet effect, and market volatility tend to raise spreads, while higher tax revenues tend to decrease them. Moreover, we prove that the rise in sovereign spread is not due to external debt accumulation itself, but due to pure balance sheet effects.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija



POVEZANOST RADA


Projekt / tema
002-0022469-2470 - Makroekonomska konvergencija Republike Hrvatske Europskoj uniji (Željko Lovrinčević, )

Ustanove
Ekonomski institut, Zagreb