Understanding Corporate Vulnerabilities in Latin America

By Carlos Caceres, Fabiano Rodrigues Rodrigues Bastos

April 7, 2016

Preview Citation

Format: Chicago

Carlos Caceres, and Fabiano Rodrigues Rodrigues Bastos. Understanding Corporate Vulnerabilities in Latin America, (USA: International Monetary Fund, 2016) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper analyzes the potential risks and vulnerabilities of non-financial corporates in Latin America and Canada. We quantify the impact of company-specific, countryspecific, and global factors in driving corporate spreads. Overall, we found that all these factors play a role in explaining corporate risk. In particular, country specific factors such as exchange rate and sovereign CDS spreads are significantly associated with changes in corporate spreads, underscoring the importance of solid policy frameworks. We also find that global conditions, such as the VIX, are dominant drivers of corporate spreads. In recent years, the adverse effects from deteriorating domestic conditions have been broadly offset by relatively bening global financial conditions. However, a sustained reversal in these conditions would put significant pressure on corporate risk.

Subject: Commodity prices, Credit default swap, Currencies, Exchange rate adjustments, Exchange rates, Foreign exchange, Money, Prices

Keywords: CDS spread, Commodity price, Commodity prices, Corporate risk, Corporate spread, Credit default swap, Currencies, Exchange rate adjustments, Exchange rates, Foreign currency, Fundamentals, Global, Implied CDS, Market-based measures, Sovereign CDS, Terms of trade, Terms-of-trade index, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/080
Stock No:

WPIEA2016080
ISBN:

9781484321546
ISSN:

1018-5941

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