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Country-Risk Premium in the Periphery and the International Financial Cycle 1999-2019 (Brazil Research Seminar Series)

November 7, 2019 @ 1:00 pm - 2:00 pm

Taking into account the pull-push debate on the weight that external or internal factors have on the behaviour of capital flows and country-risk premium of developing economies, the aim of this article is to assess empirically the extent by which the push factors, linked to global liquidity and interest rates, (compared to country-specific factors) play on the changes in the risk premium of a set of countries of the periphery, in the period 1999-2019. This is done using the methodology of Principal Component Analysis, which can relate the information from different countries to its common sources. We also test for a structural change in the premium risk series in 2003, by means of structural break tests. We find that push factors do play the predominant role in explaining country risk changes of our selected peripherical countries and that there was indeed a substantial general reduction in country risk premia after 2003, confirming that the external constraints of the periphery were significantly loosened by more favourable conditions in the international economy in the more recent period. The results are in line both with the view that cycles in peripherical economies are broadly subordinated to global financial cycles, in but also that such external conditions substantially improved compared to the 1990s.


November 7, 2019
1:00 pm - 2:00 pm


802 International Affairs Building
420W 118th Street
New York, NY 10027 United States