{"title":"Quantifying Risks to Sovereign Market Access","authors":"Diana Zigraiova, Aitor Erce","doi":"10.1057/s41308-024-00244-z","DOIUrl":null,"url":null,"abstract":"<p>We use the euro area debt crisis experience to study episodes when sovereigns lose access to bond markets. We construct a detailed dataset with potential leading indicators and evaluate their ability to forecast episodes when market access is lost. We show that factors capable of foreseeing market tensions go beyond traditional metrics of the fiscal stance and of global and domestic macroeconomic conditions. Variables that describe conditions in primary and secondary sovereign bond markets are key predictors of market access tensions. We construct simple indices and multivariate models and use them to predict market access tensions. Simple indices capture worsening conditions but yield unsatisfactory out-of-sample results. Multivariate models generate better forecasts highlighting how tools to evaluate risks to sovereign market access trade off communicability and accuracy. Finally, we show the importance of accounting for different policymakers’ preferences.</p>","PeriodicalId":47177,"journal":{"name":"Imf Economic Review","volume":"21 1","pages":""},"PeriodicalIF":3.3000,"publicationDate":"2024-09-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Imf Economic Review","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1057/s41308-024-00244-z","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
We use the euro area debt crisis experience to study episodes when sovereigns lose access to bond markets. We construct a detailed dataset with potential leading indicators and evaluate their ability to forecast episodes when market access is lost. We show that factors capable of foreseeing market tensions go beyond traditional metrics of the fiscal stance and of global and domestic macroeconomic conditions. Variables that describe conditions in primary and secondary sovereign bond markets are key predictors of market access tensions. We construct simple indices and multivariate models and use them to predict market access tensions. Simple indices capture worsening conditions but yield unsatisfactory out-of-sample results. Multivariate models generate better forecasts highlighting how tools to evaluate risks to sovereign market access trade off communicability and accuracy. Finally, we show the importance of accounting for different policymakers’ preferences.
期刊介绍：
The IMF Economic Review is the official research journal of the International Monetary Fund (IMF). It is dedicated to publishing peer-reviewed, high-quality, context-related academic research on open-economy macroeconomics. It emphasizes rigorous analysis with an empirical orientation that is of interest to a broad audience, including academics and policymakers. Studies that borrow from, and interact with, other fields such as finance, international trade, political economy, labor, economic history or development are also welcome.
The views presented in published papers are those of the authors and should not be attributed to, or reported as, reflecting the position of the IMF, its Executive Board, or any other organization mentioned herein.
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