Group Cointegrating Relationships
[SPREAD, ED] [SPREAD, OPEN] [SPREAD, RES] [SPREAD, WEOπ]
SPREAD: Asia -3.28 (.00) -3.39 (.00) -3.74 (.00) -3.26 (.00)
SPREAD: All countries -3.26 (.00) -4.95 (.00) -6.56 (.00) -4.78 (.00) SPREAD: Latin America 0.01 (.50) -0.07 (.47) -1.96 (.03) -0.23 (.40) SPREAD: Latin America (large) -0.19 (.42) -0.88 (0.19) -1.29 (.10) -1.03 (.15)
SPREAD: Europe -1.18 (.12) -1.57 (.06) -3.06 (.00) -1.80 (.04)
SPREAD: Africa 0.25 (.40) -0.48 (.32) -2.26 (.01) -0.02 (.49)
Note: SPREAD is EMBI+ data or CDS data as explained in the test, in Figure 1, and in the appendix. IPS is the Im, Pesaran and Shin test; LLC is the Levin, Lin and Chu test. See, for example, Maddala and Kim (1998), for additional details. The IPS test statistic is the W-test statistic while the p-value given in parentheses is based on the normal approximation. The average augmented Dickey-Fuller t-statistic is shown in brackets. The panel cointegration test relies on Kao’s (1999) version of the Engle-
Granger two-step method applied to a panel. p-values are given in parenthesis. The appendix provides a list of countries included in each country blocks.
Table 3 – Determinants of Emerging Market Bond Yield Spreads, 1997-2009
Dependent Variable: log SPREADit
Independent Variables
All Countries Africa Latin & South America
Europe Asia Asymmetric Global Financial
Crisis DOMESTIC πgap 0.001 (.005) 0.004 (.005) 0.022 (.006)* -0.004 (.002)+ -0.008 (.026) -0.005 (.004) 0.004 (0.003) ER 0.014 (.014) -0.167 (.026)* 0.027 (.023) -0.017 (.021) 0.236 (.089)* 0.041 (.015)* 0.041 (.015)* DCgap -0.428 (.240)+ 0.182 (.145) -0.722 (.197)* -0.006 (.314) -1.876 (1.48) -0.570 (.226)* -0.524 (.224)** WEOπ -0.0003 (.001) -0.010 (.005)** -0.040 (.003)* -0.0007 (.0004)+ 0.004 (.039) - -0.0001 (.001) (π-WEOπ)>0 - - - 0.002 (.003) - (π-WEOπ)<0 - - - -0.001 (.001) - WEOy 0.001 (.006) -0.031 (.011) -0.021 (.006)* 0.007 (.006) -0.081 (.020)* -0.001 (.006) 0.0006 (.0006) WEOb -0.012 (.004)* -0.088 (.004)** -0.018 (.005)* -0.017 (.006)* -0.017 (.017) -0.013 (.004)* -0.013 (.004)* CORRuption - - - FISCAL - - - TRANSPARENCY 0.039 (.008)* 0.385 (.102)* 0.057 (.017)* 0.078 (.017)* 0.050 (.040) 0.023 (.007)* 0.022 (.007)* EXTERNAL Δfed funds 0.0002 (.05) 0.006 (.061) 0.083 (.034)* 0.075 (0.055) 0.265 (.112)** 0.093(.045)** 0.094 (.044) EDgap -0.017 (.047) -0.008 (.038) 0.021 (.037) 0.055 (.057) 0.032 (.187) 0.009 (.041) 0.014 (.041) OIL -0.001 (.001) -0.002 (.001) -0.002 (.0009)* -0.001 (0.002) -0.0008 (.00) -0.003 (.001)* -0.003 (.001)* OPEN 0.010 (.001)* 0.002 (.002) 0.035 (.005)* -0.006 (0.003)** -0.002 (.005) 0.009 (.001)* 0.010 (.001)* FDI 0.023 (.007)* -0.050 (.011)* -0.035 (.012)* 0.022 (.008)* 0.185 (.066)* 0.011 (.007)+ 0.010 (.007) RESgap 0.152 (.139) 0.368 (.099)* 0.166 (.145) 0.268 (.148)+ -1.528 (.663)** -0.149 (.123) -0.101 (.119) GFC - 0.094 (.115) 0.319 (.054)* 0.406 (.105)* 0.143 (.178) 0.458 (.062)* 0.451 (.061)* VOLATILITY VIX -0.001 (.003) -0.005 (.003) -0.011 (.00)* -0.004 (.004) 0.037 (.008)* -0.009 (.003)* -0.009 (.003)* REGIONS C 3.498 (.165)* 4.231 (.407)* 4.919 (.146)* 4.98 (.219)* 2.732 (.710)* 3.693 (.160)* 3.680 (.160)* L&SA 1.349 (.117)* - - - - 1.328 (.112)* 1.345 (.111)* EUROPE 1.014 (.098)* - - - - 0.996 (.094)* 1.015 (.094)* AFRICA 0.889 (.111)* - - - - 0.858 (.106)* 0.874 (.106)* OIL producers 0.328 (.052)* - - - - 0.311 (.046)* 0.312 (.046)* SUMMARY STATS 2
R
0.43 0.90 0.87 0.81 0.58 0.52 0.52 F (p-value) 30.16 (.00) 49.41 (.00) 90.10 (.00) 47.37 (.00) 13.80 (.00) 37.87 (.00) 40.18 (.00) Redundant FE - 78.66 (.00) 49.72 (.00) 74.73 (.00) 8.69 (.00) - - OBS 722 88 245 212 177 694 722 Cross-sections 18 3 5 5 5 18 18Notes: Gap variables (π, DC) are estimated via an HP filter, as explained in the text. ER is the exchange rate regimes of Levy-Yeyati and Sturzenegger (2005). All other variable definitions are constrained in the appendix. *,** denotes statistical significance at the 1% and 5% levels, respectively. All estimates are GLS estimates using cross-section weights and heteroskedasticity adjusted standard errors.
Independent Variables
All Countries Africa Latin & South America
Europe Asia Asymmetric Global Financial
Crisis DOMESTIC πgap 0.006 (.003)** 0.002 (.002) 0.015 (.003)* -0.002 (.004) 0.008 (.026) -0.004 (.003) 0.004 (.003) ER 0.081 (.009)* -0.073 (.011) 0.002 (.016) -0.031 (.027) 0.411 (.088)* 0.10 (.01)* 0.104 (.009)* DCgap -0.741 (.145)* 0.063 (.061) -0.560 (.168)* 0.236 (.287) -2.29 (1.28)+ -0.86 (.17)* -0.753 (.137)* WEOπ -0.001 (.0005)+ 0.001 (.003) -0.021 (.001)* 0.0004 (.001) -0.023 (.035) - -0.001 (.0005) (π-WEOπ)>0 - - - 0.002 (.003) - (π-WEOπ)<0 - - - -0.001 (.0007)+ - WEOy -0.001 (.004) -0.017 (.005)* -0.003 (.003) 0.019 (.006)* -0.067 (.022)* -0.001 (.004) -0.001 (.004) WEOb -0.019 (.003)* 0.006 (.002)* 0.0004 (.004) -0.018 (.006)* 0.0003 (.018) -0.01 (.003)* -0.016 (.003)* CORR -0.017 (.001)* -0.018 (.001)* 0.013 (.002)* -0.012 (.004)* 0.018 (.006)* -0.01 (.001)* -0.015 (.001)* FISCAL 0.004 (.003)+ 0.002 (.003) -0.012 (.005)* 0.035 (.006)* -0.035 (.033) 0.01 (.003)* 0.008 (.002)* TRANSP. - - - EXTERNAL Δfed funds -0.095 (.032)* -0.107 (.026)* 0.063 (.033)+ -0.062 (.058) 0.186 (.109)+ -0.01 (0.03) -0.009 (.030) EDgap 0.051 (.033) 0.003 (.017) -0.002 (.035) 0.062 (.006) 0.201 (.168) 0.02 (.04) 0.033 (.031) OIL -0.001 (.001) -0.0004 (.001) -0.004 (.001)* -0.002 (.002) 0.006 (.003) -0.003 (.005) -0.003 (.001)* OPEN 0.098 (.001)* 0.005 (.001)* 0.016 (.00)* -0.011 (.004)* -0.00 (.005) 0.008 (.001)* 0.01 (.001)* FDI 0.006 (.004) -0.002 (.005) -0.018 (.090)** 0.005 (.010) 0.087 (.060) -0.001 (.005) -0.001 (.004) RESgap -0.052 (.074) 0.392 (.064)* -0.17 (.080)** 0.229 (.172) -1.475 (.63)** -0.28 (.09)* -0.224 (.073)* GFC - 0.048 (.058) 0.596 (.063)* 0.847 (.105)* 0.078 (.192) 0.60 (.05)* 0.584 (.043)* VOLATILITY VIX -0.009 (.002)* -0.01 (.002)* -0.023 (.002)* -0.014 (.005)* 0.044 (.007)* -0.02 (.002)* -0.016 (.002)* REGIONS C 4.132 (.248)* 6.161 (.257)* 6.518 (.415)* 3.54 (.53)* 4.80 (2.74)+ 3.83 (.26)* 3.900 (.238)* L&SA 1.393 (.078)* - - - - 1.28 (.08)* 1.290 (.071)* EUROPE 0.817 (.071)* - - - - 0.78 (.07)* 0.807 (.062)* AFRICA 0.932 (.070)* - - - - 0.88 (.07)* 0.885 (.065)* OIL producers 0.131 (.035)* - - - - 0.12 (.03)* 0.129 (.029)* SUMMARY STATS 2
R
0.56 0.97 0.85 0.80 0.61 0.60 0.61 F (p-value) 58.99 (.00) 196.49 (.00) 88.15 (.00) 42.06 (.00) 14.22 (.00) 63.85 (.00) 69.32 (.00) Redundant FE - 115.93 (.00) 84.80 (.00) 59.17 (.006) 11.92 (.00) - - OBS 865 124 360 208 173 865 865 Cross-sections 22 4 8 5 5 22 22Table 4 – Determinants of Emerging Market Bond Yield Spreads, 1997-2009
Dependent Variable: log SPREADit
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Country and Region List (22 Countries) Latin and South America
Argentina (large) Brazil (large) Colombia Ecuador Mexico (large) Panama Peru Venezuela Europe Bulgaria Poland Russia Turkey Ukraine Africa Egypt Morocco Nigeria South Africa Asia Indonesia Korea Malaysia Philippines Thailand