Sovereign Risk and Economic Complexity
Year: 2024

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 o