An International Monetary Fund paper, published on Friday, shows that while hedging strategies can explain much of the in-sample variation in borrowing spreads, these instruments fail to materialise during tranquil times.

Yuanyan Sophia Zhang, Marcos Chamon and Luca Antonio Ricci, the paper's authors, examine how useful different financial instruments are at hedging shocks to country borrowing spreads. The authors note the availability of financial instruments related to indices that track