Tesis
Do sovereign bond spreads in inflation targeting economies reflect creditworthiness and anticipate stress scenarios?
Autor
Warnes, Ignacio
Institución
Resumen
When successfully executed, inflation targeting (IT) has managed to
prevent situations of fiscal dominance and to anchor inflation
expectations. This has helped enhance the information content of the
price of government bonds and the perception of sovereign risk, thus
adding resiliency to sovereign spreads. The paper assesses the resilience
of sovereign spreads of IT economies to shocks and compares with
those of countries with other policy frameworks. I conclude that, while
in the short term sovereign spreads of IT economies are more resilient
to macroeconomic volatilities, they tend to widen in the long run after
the shock occurs anyway, independently of the monetary policy
framework.