EPU spillovers and sovereign CDS spreads: A cross‐country study

Yuting Gong, Zhongzhi He and Wenjun Xue

Journal of Futures Markets, 2023, vol. 43, issue 12, 1770-1806

Abstract: This paper examines the spillover effect of global economic policy uncertainty (EPU) on sovereign credit default swap (CDS) spreads in a sample of 21 countries. We use a multivariate quantile model to measure EPU spillovers for each country and find that global EPU spillovers have a significant and positive effect on subsequent CDS spreads in both developed and emerging markets. The spillover effect is stronger in developed markets compared to emerging markets. The positive relationship between EPU spillovers and CDS spreads remain significant when controlling for various economic, financial, and political risk factors. Our results are robust to alternative measures of EPU spillovers and sovereign credit risk, across different forecast horizons, and to potential endogeneity resulting from omitted variables.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/fut.22456

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:43:y:2023:i:12:p:1770-1806

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().