Sovereign Asset Values and Implications for the Credit Market

Peter Posch and Eva-Maria Kalteier

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: Using the contingent claim approach and market data on sovereign credit default swaps we assess the drivers of a country s risk perception. Deriving market-based asset values for a set of advanced economies we gain insights into the capital markets perspectives on sovereign creditworthiness. We find the market-based asset values to be positively influenced by debt and to be an early risk indicator for economic developments. In a cross-section analysis we identify drivers of the economic risk of countries. Clustering the countries according to their debt to asset value ratios provides further insights into the market perceptions of sovereign credit risk. For example we find the asset values of countries with higher ratios react to changes in the global equity market. Countries with a lower ratio react more to the political stability within the country.

JEL-codes: G13 G15 H63 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Journal Article: Sovereign asset values and implications for the credit market (2013)
Journal Article: Sovereign asset values and implications for the credit market (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79986

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