International extreme sovereign risk connectedness: Network structure and roles

Wei-Qiang Huang, Peipei Liu and Yao-Long Zhu

The North American Journal of Economics and Finance, 2025, vol. 76, issue C

Abstract: With network topology measures, we can model the global and individual properties of international extreme sovereign risk spillovers and understand how shocks propagate. Hence, using dynamic connectedness based on a TVP-VAR model, we construct daily extreme sovereign risk spillover networks based on defined extreme risk series among the G20. Our purpose is to creatively explore the network structures and describe international connectedness. We find that system- and country-level measures are all more sensitive to global systemic events, such as the COVID-19 pandemic. Country-level analysis shows that emerging countries such as Mexico, South Africa and European countries such as Spain emit and receive larger risk spillovers. Using the Logit and threshold regression, we creatively explore whether these system- and country-level measures can explain the probability of countries’ extreme sovereign risk outbreaks. The results show that system-level measures such as total risk spillover strength and country-level measures all play positive roles. Specifically, the greater the total risk spillover strength, the more central countries’ position and the greater the probability of countries’ extreme sovereign risk outbreak. Most importantly, their roles are the largest when the total risk spillover strength is at the middle level.

Keywords: Extreme sovereign risk; Connectedness; Network structure; TVP-VAR model; Logit regression; Threshold regression (search for similar items in EconPapers)
JEL-codes: C32 F34 G15 G23 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062940824002808
Full text for ScienceDirect subscribers only

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:eee:ecofin:v:76:y:2025:i:c:s1062940824002808

DOI: 10.1016/j.najef.2024.102355

Access Statistics for this article

The North American Journal of Economics and Finance is currently edited by Hamid Beladi

More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().