The determinants of default risk in Brazil

We formulated a general unrestricted model of the Brazilian Emerging Markets Bond Index Plus (EMBI+) spreads, a proxy for the country's default risk. Employing algorithms that perform automated model selection, we found that macroeconomic fundamentals, such as current account deficit ratio to g...

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Bibliographic Details
Published inApplied economics letters Vol. 17; no. 17; pp. 1703 - 1708
Main Author Ferreira, Alex Luiz
Format Journal Article
LanguageEnglish
Published London Taylor & Francis 01.11.2010
Taylor and Francis Journals
Taylor & Francis LLC
SeriesApplied Economics Letters
Subjects
Bonds
Brazil
Budget deficit
Default
Economic analysis
Economic models
Economic systems
Emerging markets
Financial risks
Foreign exchange
GDP
Gross Domestic Product
Indexes
Macroeconomics
Modelling
Spread
Studies
Brazil
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Summary:We formulated a general unrestricted model of the Brazilian Emerging Markets Bond Index Plus (EMBI+) spreads, a proxy for the country's default risk. Employing algorithms that perform automated model selection, we found that macroeconomic fundamentals, such as current account deficit ratio to gross domestic product, public deficit ratio to gross domestic product and imports over foreign exchange reserves, can explain a great part of the variation in EMBI+ spreads. There is also robust evidence of systematic contagion from Argentina and Mexico and that the variance of the spread also affects its mean.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
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ISSN:1350-4851
1466-4291
DOI:10.1080/13504850903120741