THE IMPACT OF PROBABILITY OF DEFAULT AND SOVEREIGN RISK ON ECONOMIC GROWTH VARIANCE

Adina-Ionela Strachinaru
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Adina-Ionela Strachinaru: Bucharest University of Economic Studies, Romania

Revista Economica, 2021, vol. 73, issue 3, 171-185

Abstract: The banking crises create the need to capture, in the most refined form possible, the vulnerabilities of the banking system. Early warning indicators help in capturing signals that predict, in a timely manner, the likelihood of a banking crisis. In addition, the sovereign risk, captured by CDS 5Y, proved to have a major impact on the probability of default, which negatively influenced economic growth. The results were captured using a Vector Autoregression Model on a sample of EU member states.

Keywords: gross domestic product; impulse response function; probability of default; sovereign risk; VAR model; variance decomposition (search for similar items in EconPapers)
JEL-codes: A10 D81 (search for similar items in EconPapers)
Date: 2021
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