Spreads, News, and Macroeconomics: A Multivariate Regression Analysis

Paolo Mauro, Nathan Sussman and Yishay Yafeh

in Emerging Markets and Financial Globalization

Published in print March 2006 | ISBN: 9780199272693
Published online May 2006 | e-ISBN: 9780191603488 | DOI:
 Spreads, News, and Macroeconomics: A Multivariate Regression Analysis

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This chapter presents a systematic attempt to identify the determinants of bond spreads. Using multivariate regression analysis, it relates emerging market bond spreads for 1870-1913 and for the modern period to macroeconomic variables and to categories of news articles. It is shown that past and present investors pay attention to both macroeconomic fundamentals and to information reflected in the news, especially regarding violent conflicts. News on institutional reforms rarely elicit investor response. Country-specific fundamentals and news play less of a role in determining bond spreads today than they did in the past.

Keywords: bond spreads; macroeconomic fundamentals; instability; wars; regression analysis; country fixed effects

Chapter.  7918 words. 

Subjects: Financial Markets

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