Spillovers from one country’s sovereign debt to CDS (credit default swap) spreads of others during the European crisis: a spatial approach

Kışla, Gül Huyugüzel; Muradoğlu, Yaz Gűlnur; Önder, A. Özlem

doi:10.1057/s41260-022-00263-3

Cited by 5 publications

(4 citation statements)

References 64 publications

(60 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…A key finding of the analysis is that the European SovCDS market is prone to contagion effects. This result is in line with those of Blommestein et al (2016), Kchaou et al (2022), Kıs ¸la et al (2022), and Ge (2023. The spatial autoregressive coefficient is significant and positive for the entire sample, core countries, and periphery countries.…”

Section: Discussionsupporting

confidence: 86%

“…JRF 24,5 lagged value are significant in the periphery countries. This result is under the results found in Beirne and Fratzscher (2013), Giordano et al (2013) andKıs ¸la et al (2022). Therefore, SovCDS markets in these countries are sensitive to neighboring countries' economic fundamentals, pointing out the wake-up call contagion hypothesis.…”

Section: Spatial Correlation Testsmentioning

confidence: 48%

“…This result is under the results found in Beirne and Fratzscher (2013), Giordano et al . (2013) and Kışla et al. (2022).…”

Section: Resultsmentioning

confidence: 98%

See 2 more Smart Citations

Contagion in the Euro area sovereign CDS market: a spatial approach

Ben Abdallah,

Dabbou,

Gallali

2023

JRF

View full text Add to dashboard Cite

PurposeThis paper explores whether the Euro-area sovereign credit default swap market is prone to contagion effects. It investigates whether the sharp increase in sovereign CDS spread of a given country is due to a deterioration of the macroeconomic variables or some form of contagion.Design/methodology/approachFor this purpose, the authors use an innovative approach, i.e. spatial econometrics. Although modeling spatial dependence is an attractive challenge, its application in the field of finance remains limited.FindingsThe empirical findings show strong evidence of spatial dependence highlighting the presence of pure contagion. Furthermore, evidence of wake-up call contagion-increased sensitivity of investors to fundamentals of neighboring countries and shift contagion-increased sensitivity to common factors are well recorded.Originality/valueThis study aims to study a crucial financial issue that gained increased research interest, i.e. financial contagion. A methodological contribution is made by extending the standard spatial Durbin model (SDM) to analyze and differentiate between several forms of contagion. The results can be used to understand how shocks are spreading through countries.

show abstract

Section: Discussionsupporting

confidence: 86%

Section: Spatial Correlation Testsmentioning

confidence: 48%

See 1 more Smart Citation

Contagion in the Euro area sovereign CDS market: a spatial approach

Ben Abdallah,

Dabbou,

Gallali

2023

JRF

View full text Add to dashboard Cite

show abstract

“…Huyugüzel Kışla et al (2022) analyze the relationships between CDS spreads in 13 European countries using spatial econometrics techniques. The model enables the estimation of both direct and indirect transmission of sovereign risk and feedback effects within the network of these countries.…”

Section: Review Of Related Literaturementioning

confidence: 99%

Türkiye’de Kredi Temerrüt Takası (CDS), Merkezi Yönetim Dış Borç Miktarı ve Cari Açık Arasındaki İlişki

NOYAN,

İDİKUT ÖZPENÇE

2023

İnsan Ve Toplum Bilimleri Araştırmaları Dergisi

View full text Add to dashboard Cite

Debt ratios are often a static indicator of the borrowing situation in an economy. Since the debt burden, interest burden, or ratio to the national income of an economy shows the current situation, it does not provide health information for the future. Dynamic indicators are needed to understand potential debt relationships in the future. CDS spreads, which are based on a swap transaction and gained importance after the global crisis, have recently been used as a dynamic debt ratio. There are basically two reasons for this situation. The first reason is that static analyses are considered insufficient by market participants. The other reason is that CDS spreads clearly reveal the risk cost for the lender. The reason for the current account deficit and external borrowing can be sometimes the increased need for foreign exchange in a country. When considering foreign exchange and interest rate swaps within this framework, the relationship between the current account deficit and CDS spreads becomes more pronounced. This is because, among the reasons for foreign exchange inflows and outflows, there are factors such as foreign trade transactions, external borrowing, and swap transactions. The study analyzed the variables of central government external debt stock, current account deficit, and CDS spreads using wavelet coherence analysis in the R Studio program for the period of 2008:1-2023:3. The main reason for choosing this analysis method is that it obtains findings for the entire time period included in the analysis and increases the data set to very high dimensions with simulation. This characteristic of the analysis enhances the validity level of the findings. The study found no relationship between the central government external debt stock and CDS spreads in Türkiye, except for the two years following the 2008 global financial crisis. Additionally, a positive relationship was identified between the current account deficit and CDS spreads. These findings indicate that in Türkiye, the current account deficit has a greater impact on CDS spreads compared to the components of CDS spreads.

show abstract

Cross-Border Sovereign Risk Transmission in BRICIT Nations: Unveiling Asymmetries and the Role of Country Risk Premiums

Kumar,

Singh

2024

Borsa Istanbul Review

View full text Add to dashboard Cite

Spillovers from one country’s sovereign debt to CDS (credit default swap) spreads of others during the European crisis: a spatial approach

Cited by 5 publications

References 64 publications

Contagion in the Euro area sovereign CDS market: a spatial approach

Contagion in the Euro area sovereign CDS market: a spatial approach

Türkiye’de Kredi Temerrüt Takası (CDS), Merkezi Yönetim Dış Borç Miktarı ve Cari Açık Arasındaki İlişki

Cross-Border Sovereign Risk Transmission in BRICIT Nations: Unveiling Asymmetries and the Role of Country Risk Premiums

Contact Info

Product

Resources

About