Sovereign Spreads and Contagion Risks in Asia

26 Pages Posted: 14 Jun 2011

See all articles by Carlos Caceres

Carlos Caceres

International Monetary Fund (IMF)

D. Filiz Unsal

International Monetary Fund (IMF) - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: June 2011

Abstract

This paper explores how much of the movements in the sovereign spreads of Asian economies over the course of the global financial crisis has reflected shifts in (i) global risk aversion; (ii) country-specific risks, directly from worsening fundamentals, and indirectly from spillovers originating in other sovereigns and the uncertainty surrounding exchange rates. Earlier in the crisis, the increase in market-implied contagion led to higher Asian sovereign bond yield spreads over swaps. But, after the crisis, Asia’s sovereign spreads normalized, despite the debt crisis in the euro area, reflecting a fall in both exchange rate and spillover risks.

Keywords: Asia, Bond markets, Bonds, Exchange rates, Financial crisis, Financial risk, Global Financial Crisis 2008-2009, Sovereign debt

Suggested Citation

Caceres, Carlos and Unsal, D. Filiz, Sovereign Spreads and Contagion Risks in Asia (June 2011). IMF Working Paper No. 11/134, Available at SSRN: https://ssrn.com/abstract=1864437

Carlos Caceres

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

D. Filiz Unsal (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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