Sovereign Credit Risk in Latin America and Global Common Factors
Sovereign Credit Risk in Latin America and Global Common Factors
the chapter studies the importance of global common factors in the evolution of sovereign credit risk in emerging economies between 2007 and 2012. Using principal component analysis and Kalman Filter, the authors find robust evidence for the existence of a common factor using two diferent measures of sovereign risk. The authors also find that the co-movement between this common factor and two measures of individual-country sovereign risk rose significantly after the bankruptcy of Lehman Brothers on September 15, 2008.
Keywords: sovereign debt, sovereign credit risk, principal component analysis, Kalman filter, emerging markets, capital flows
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