Assessing the extent of contagion of sovereign credit risk among BRICS countries

Lumengo Bonga-Bonga and Mathias Manguzvane

Economics Bulletin, 2020, vol. 40, issue 2, 1017-1032

Abstract: This paper conducts an ex ante analysis to assess how sovereign credit risk is transmitted among BRICS countries. To this end, the conditional value-at-risk (CoVaR) methodology is used. Moreover, the paper makes use of the generalised forecast error decomposition to assess the contribution of key economic and financial variables of each of the BRICS countries to credit risk transmitted from China, the biggest economy among the BRICS. The findings of this paper show the existence of cross-transmission of credit risk shocks among BRICS countries, with China affecting the most other BRICS countries. However, the channel through which credit risk distress in China is transmitted to the other BRICS countries is not homogenous.

Keywords: Sovereign credit risk; conditional value-at-risk; contagion (search for similar items in EconPapers)
JEL-codes: C1 F3 (search for similar items in EconPapers)
Date: 2020-04-15
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Assessing the extent of contagion of sovereign credit risk among BRICS countries (2018)
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