Long-Run Movement and Predictability of Bond Spread for BRICS and PIIGS: The Role of Economic, Financial and Political Risks#


  • Sheung-Chi Chow Research Institute for Business, Hang Seng Management College
  • Rangan Gupta Department of Economics, University of Pretoria, Pretoria, 0002
  • Tahir Suleman School of Economics and Finance, Victoria University of Wellington and School of Business, Wellington Institute of Technology
  • Wing-Keung Wong Department of Finance, Fintech Center, and Big Data Research Center, Asia University; Department of Medical Research, China Medical University Hospital; Department of Economics and Finance, The Hang Seng University of Hong Kong


Country Risk, Bond Spread, Linear and Nonlinear Granger Causality.


We examine co-movement and predictability of Bond Spread of BRICS and PIIGS with respect to political risk (PR), financial risk (FR), and economic risk (ER). Our linear Granger causality findings imply that PR is the most important risk in predicting bond spread, followed by ER in both BRICS and in PIIGS, while FR is useful in predicting bond spread in BRICS only. Our nonlinear individual causality results infer that ER is the most important risk in predicting bond spread, followed by FR, and PR. We make a conjecture that linear and nonlinear causality are independent and our findings support this.






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