نقش شاخصهای بنیادی اقتصادی آسیب پذیری اقتصادی بازارهای نوظهور

This paper empirically evaluates policies that can potentially reduce the economic vulnerability of emerging market economies. Through panel data estimation on a group of 23 countries, we relate sovereign spreads to global risk shocks, and explore the argument suggested by Calvo (2003) which focuses on macroeconomic fundamentals as multipliers of external shocks. The results support policies towards financial liberalization, public debt management, consistent economic growth, development of the domestic financial market and improvements in governance indicators. We argue that those policies were crucial for the projected rapid economic rebound of the emerging market economies facing the global crisis of 2007–2009.

Since 2003, emerging markets have been enjoying an extremely favorable economic climate, generated by high global liquidity. In the beginning of 2007 the excess of liquidity and the overall positive economic performance of these countries led to the lowest sovereign spreads in history, measured by the JPMorgan Emerging Markets Bond Index Global–EMBIG1, falling below 200 basis points, as shown in Fig. 1. Full-size image (41 K) Fig. 1. EMBIG × VIX. Figure options After 2007 and especially in the last quarter of 2008, the US sub-prime mortgage crisis changed this positive scenario and led to a generalized increase in the global market risk perception with the VIX index increasing by four times2. Nevertheless, it has been noteworthy that emerging countries have been reported higher resilience to the current global crisis of 2007–2009, with the EMBIG spreads roughly double in the same period, and returning to its 300 basis point level in November 2009. During the crisis, the highest level of EMBIG spreads was 800 basis point, a significant smaller figure than the previous levels achieved at the Russian (1998), the Brazilian real devaluation/depreciation (1999/2002) and the Argentinean default (2001/2002) crises. Such resilience can also be noted by comparing the evolution of sovereign spreads in basis point with those on high yield US corporate bonds (JPMorgan Domestic High Yield) as shown in Fig. 2. Both were grouped according to the rating classifications B and BB3, and one can see that during the global crisis of 2007–2009, sovereign spreads were lower than US corporate bonds spreads of same rating. Full-size image (35 K) Fig. 2. Sovereign spreads × JPMorgan domestic HY-BB and B rated. Figure options The economic resilience facing the global crisis is also emphasized by the Global Financial Stability Report (2009) and World Economic Outlook (2009), where emerging economies are expected to rebound faster than most developed markets. The rebound is driven by China, India, and a number of other emerging Asian economies. Other emerging economies are benefiting from commodity price increases, as well as from stronger policy frameworks implemented during previous years. Eyzaguirre (2009) especially mentions the Latin American and Caribbean (LAC) region which faced the crisis better equipped with sound economic policies, relying on smaller financial, external, and fiscal vulnerabilities, which allowed a number of countries of the region to implement countercyclical monetary and fiscal policies. According to the Global Financial Stability Report (2007), the improvement in sovereigns' economic vulnerability was achieved through policies implemented after 2003, during the favorable global economic climate. Among those domestic policy efforts it is worthy to mention: i) the improvement in public debt management, by increasing the average debt maturity, decreasing the stock of FX-currency debt and placing external debt denominated in domestic currency; ii) the development of domestic financial markets with the broadening of the investor base and improvements in the risk measurement techniques of financial institutions; iii) the gradual financial liberalization of the capital account; iv) the adoption of institutional governance indicators; and finally iii) sustainable fiscal adjustment, reserve accumulation and price stability policies. Even though financial stability has improved significantly in 2009, reflecting the decline of systemic risks, the risk of reversal remains significant. The crucial issue for emerging markets is whether this economic resilience is sustainable in the face of a potential downturn of cyclical factors, such as those involving liquidity, changes in global risk aversion and several uncertainties related to a general economic slowdown. Vulnerabilities remain, especially in countries heavily dependent on external financing. The objective of this study is to empirically evaluate policies that can potentially reduce the economic vulnerability of emerging market economies. The data comprise 23 countries (Brazil, Mexico, Russia, Turkey, Philippines, Venezuela, Malaysia, Colombia, Indonesia, Panama, Lebanon, Peru, China, Argentina, Ukraine, Uruguay, Chile, Ecuador, South Africa, Poland, El Salvador, Bulgaria and Hungary) in the period 1998–2007, which in December 2007 accounted for nearly 96% of the JPMorgan EMBIG subindices as shown in Fig. 3. Full-size image (36 K) Fig. 3. Market capitalization of EMBIG subindices. Figure options According to González-Páramo (2006), the economic vulnerability of any country can be measured through data on sovereign spreads. This argument is based on the reasoning that economic agents price sovereign spreads by making judgments regarding expectations of future macroeconomic fundamentals of a certain economy. Such expectations are related to the credit risk of the debtor and measure both the ability and willingness to pay the debt. Although sovereign spreads reflect country-specific and idiosyncratic fundamentals, one can note a co-movement of their time evolution, which suggests a common factor affecting all sovereigns simultaneously. According to most authors, such a common factor is a measure of global risk aversion, and stands as an additional element in the determinants of sovereign spreads.4 We follow this argument and conduct the economic vulnerability analysis through a panel data model on sovereign spreads and their response to both macroeconomic fundamentals and a global risk aversion shock. This study differs from others in the literature of determinants of sovereign spreads by focusing on the role that domestic fundamentals play in lessening economic vulnerability. Such argument is stressed by Calvo (2003), who points out that the same external shock can lead to different responses in each economy. In this context, domestic fundamentals act as multipliers of external shocks.5 Thus, in our model, sovereign spreads are explained mainly by global risk aversion shock, allowing fundamentals to act as multipliers of those shocks. Among a list of macroeconomic fundamentals, we select: financial liberalization; public debt as proportion to GDP; ratio of FX-currency debt to total public debt; volatility of nominal GDP rate; development of domestic financial market; and the World Bank governance indicators. The study is organized as follows: the next section presents the literature related to the determinants of sovereign spreads; Section 3 introduces the model and the explanatory variables; 4 and 5 present the results and the last section summarizes.

It is noteworthy that emerging market countries have been reporting higher resilience to the global crisis of 2007–2009, and are expected to rebound faster than most developed markets, mainly driven by China, India, and a number of other emerging Asian economies. Many emerging economies are benefiting from stronger policy frameworks implemented during previous years. In fact, several sovereigns faced the global crisis better equipped with more solid and credible economic sound policies, such as smaller financial, external, and fiscal vulnerabilities, which allowed a number of countries to implement countercyclical monetary and fiscal policies. Even though financial stability has improved significantly in 2009, reflecting the decline of systemic risks, the risk of reversal remains significant. The crucial issue for emerging markets is whether this economic resilience is sustainable, therefore, reducing the economic vulnerability emerges as a constant effort for sovereign policy-makers. This study empirically evaluates policies that can potentially reduce the economic vulnerability of emerging market economies. Through panel data estimation on 23 countries (Brazil, Mexico, Russia, Turkey, Philippines, Venezuela, Malaysia, Colombia, Indonesia, Panama, Lebanon, Peru, China, Argentina, Ukraine, Uruguay, Chile, Ecuador, South Africa, Poland, El Salvador, Bulgaria and Hungary) in the period 1998–2007, we relate sovereign spreads to global risk shocks, and explore the argument suggested by Calvo (2003), who points out that the same external shock can lead to different responses in each economy. In this context, domestic fundamentals act indeed as multipliers of global risk shocks. The results support policies towards financial liberalization, public debt management, consistent economic growth, development of the domestic financial market and improvements in governance indicators, especially the rule of law and regulatory quality. We argue that those policies were crucial for the projected rapid economic rebound of the emerging market economies facing the global crisis of 2007–2009. Other results show that pricing models for sovereign spreads where counties are equally affected by a global risk shock might induce both spreads' pricing errors and misleading conclusions regarding the effects of sound economic policies.