Sovereign Risk and Financial Risk

Simon Gilchrist, Bin Wei, Vivian Yue and Egon Zakrajšek ()

No 29501, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, we study the interplay between sovereign risk and global financial risk. We show that a substantial portion of the comovement among sovereign spreads is accounted for by changes in global financial risk. We construct bond-level sovereign spreads for dollar-denominated bonds issued by over 50 countries from 1995 to 2020 and use various indicators to measure global financial risk. Through panel regressions and local projection analysis, we find that an increase in global financial risk causes a large and persistent widening of sovereign bond spreads. These effects are strongest when measuring global risk using the excess bond premium – a measure of the risk-bearing capacity of U.S. financial intermediaries. The spillover effects of global financial risk are more pronounced for speculative-grade sovereign bonds.

JEL-codes: E43 E44 F33 G12 (search for similar items in EconPapers)
Date: 2021-11
New Economics Papers: this item is included in nep-fdg, nep-fmk, nep-ifn, nep-mac and nep-rmg
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Citations: View citations in EconPapers (2)

Published as Sovereign Risk and Financial Risk , Simon Gilchrist, Bin Wei, Vivian Z. Yue, Egon Zakrajšek. in NBER International Seminar on Macroeconomics 2021 , Galí and West. 2022
Published as Simon Gilchrist & Bin Wei & Vivian Z. Yue & Egon Zakrajšek, 2022. "Sovereign risk and financial risk," Journal of International Economics, .

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Related works:
Journal Article: Sovereign risk and financial risk (2022)
Chapter: Sovereign Risk and Financial Risk (2021)
Working Paper: Sovereign Risk and Financial Risk (2021)
Working Paper: Sovereign Risk and Financial Risk (2021)
Working Paper: Sovereign Risk and Financial Risk (2021)
Working Paper: Sovereign Risk and Financial Risk (2013)
Working Paper: Sovereign Risk and Financial Risk (2012)
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