U.S. Real Interest Rates and Default Risk in Emerging Economies | Zendy

Nathan Foley-Fisher | Zendy; Bernardo Guimarães | Zendy

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U.S. Real Interest Rates and Default Risk in Emerging Economies

Author(s) -

Nathan Foley-Fisher,

Bernardo Guimarães

Publication year - 2012

Publication title -

international finance discussion paper

Language(s) - English

Resource type - Journals

eISSN - 2767-4509

pISSN - 1073-2500

DOI - 10.17016/ifdp.2012.1051

Subject(s) - emerging markets , interest rate , default risk , sovereign default , economics , monetary economics , credit risk , sovereignty , financial economics , macroeconomics , actuarial science , sovereign debt , politics , political science , law

This paper empirically investigates the impact of changes in US real interest rates on sovereign default risk in emerging economies using the method of identification through heteroskedasticity. Policy-induced increases in US interest rates starkly raise default risk in emerging market economies. However, the overall correlation between US real interest rates and the risk of default is negative, demonstrating that the effects of other variables dominate the anterior relationship

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