Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/299429 
Year of Publication: 
2024
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-1555
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
This paper investigates how a country's economic complexity influences its sovereign yield spread with respect to the United States. Notably, a one-unit increase in the Economic Complexity Index is associated with a reduction of about 87 basis points in the 10-year yield spread. However, this effect is largely non-significant for maturities under three years. This suggests that economic complexity affects not only the level of the sovereign yield spreads but also the curve slope. The first set of models utilizes advanced causal machine learning tools, while the second focuses on economic complexity's predictive power. Economic complexity ranks among the top three predictors, alongside inflation and institutional factors like the rule of law. The paper also discusses the potential mechanisms through which economic complexity reduces sovereign risk and emphasizes its role as a long-run determinant of productivity, output, and income stability, and the likelihood of fiscal crises.
Subjects: 
convenience yields
double-machine-learning,government debt
sovereign credit risk
XGBoost
yield curve
JEL: 
F34
G12
G15
H63
O40
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.