How do oil prices affect emerging market sovereign bond spreads?

Shiu Sheng Chen, Shiangtsz Huang, Tzu Yu Lin

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

This paper examines whether oil price changes have significant impacts on emerging market sovereign bond spreads. In particular, we focus on how different structural shocks to oil prices affect the bond spreads. Using monthly data for 15 emerging market countries from 1998 to 2019, we show evidence that shocks to oil supply play an insignificant role in determining the bond spreads. In contrast, oil-specific demand shocks have both statistically and economically significant impacts on emerging market sovereign bond spreads. Global aggregate demand shocks are of secondary importance. As oil-specific demand shocks are associated with financial market speculative activity, such activity may lead to search-for-yield behavior in emerging market bond markets, and thus reduce emerging market sovereign spreads.

Original languageEnglish
Article number102700
JournalJournal of International Money and Finance
Volume128
DOIs
Publication statusPublished - 2022 Nov

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'How do oil prices affect emerging market sovereign bond spreads?'. Together they form a unique fingerprint.

Cite this