Re-examining the Impact of Oil Price Uncertainty on Sovereign CDS Spread of GCC Countries - Accounting for the Asymmetry and Outliers

Aktham Maghyereh, Abdel Razzaq Al Rababa'a and Salem Adel Ziadat ()
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Salem Adel Ziadat: Department of Accounting & Finance, United Arab Emirates University, United Arab Emirates

Energy RESEARCH LETTERS, 2024, vol. 5, issue 1, 1-6

Abstract: We examine the effect of oil price uncertainty on sovereign credit risks in Gulf Cooperation Council (GCC) countries. Unlike past studies, we employ a structural vector autoregression with multivariate GARCH-in-mean (VAR-GARCH-in-mean) approach after filtering out outliers in the observed series. The findings show that uncertainty in the oil market has a positive impact on the sovereign Credit Default Swap (CDS) spreads of the GCC countries. Furthermore, we find that GCC sovereign CDS spreads react asymmetrically to positive and negative oil price shocks.

Keywords: Sovereign credit risk; Oil price uncertainty; VAR-GARCH-in-mean; GCC countries (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2024
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