Essays on Economic Policy (ESPE in Spanish) - Global Risk Appetite and EMBI‑Colombia: Evidence on a Structural Break and the Fiscal Policy Role
En la revista Ensayos sobre Política Económica (ESPE) divulgamos los resultados y las propuestas de política que surgen de investigaciones académicas realizadas en el Banco de la República. Cuando nos lea, tenga siempre presente que el contenido de nuestros artículos, así como los análisis y conclusiones que de ellos se derivan, son exclusiva responsabilidad de sus autores. El material divulgado en nuestra revista ESPE no compromete ni representa la opinión del Banco de la República ni la de su Junta Directiva.
Abstract
This paper shows that the Colombian sovereign risk (EMBI‑Colombia) is mainly determined by international investors’ risk appetite, whose response is non‑linear and depends on the government fiscal stance. It is also shown that the relationship between these variables experienced an important structural break in the second half of the 2000’s, apparently associated to the global financial crisis and the improvement in the local macro‑fundamentals. The consequences of these findings might be particularly important for this country, as they help to explain both the lower financial costs of public debt as the local market less uncertainty to external shocks, which have been observed in recent times.
