Sovereign credit default swaps and the macroeconomy

Yang Liu · Bruce M. Morley

59 citations0/0 files storedApplied Economics Letters

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Credit Risk and Financial Regulations Monetary Policy and Economic Impact Global Financial Crisis and Policies

Abstract

The aim of this study is to determine whether the domestic economy as represented by the interest rate, the international economic status as represented by the exchange rate or both determine sovereign Credit Default Swap (CDS) spreads. Using a Vector Autoregressive (VAR) and Granger noncausality tests, the results suggest that it is the exchange rate that has the most important effect on sovereign CDS spreads, with domestic interest rates having only a limited effect. There is also some evidence of causality running from the CDS spread to the exchange rate.

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2010The reaction of emerging market credit default swap spreads to sovereign credit rating changes 2006Exploring the components of credit risk in credit default swaps

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2023Does Geopolitical Risk Matter for Sovereign Credit Risk? Fresh Evidence from Nonlinear Analysis

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