 The impact of global shocks on sovereign risk: Role of domestic factorsMasahiro Inoguchi Economic Systems, 2025, vol. 49, issue 2 Abstract: This paper explores how domestic factors affect the linkages between global market uncertainty and sovereign credit risk in emerging market economies (EMEs). First, we assess the dynamic conditional correlations (DCCs) between sovereign credit default swap spreads and the VIX as a measure of the linkage between sovereign risk and global financial uncertainty. Second, we estimate how domestic idiosyncratic factors influence the calculated DCCs for periods before, during, and after the global financial crisis (GFC). Our findings reveal that the sensitivity of sovereign risk to global financial uncertainty (the calculated DCC series) was higher during and after the GFC and in EMEs and responded to domestic economic conditions particularly in EMEs. Specifically, the magnitude of the DCCs was higher in EMEs with lower domestic stock market returns in the post-GFC period. In addition to the postcrisis period, domestic factors influenced the DCCs of EMEs before and during the GFC. Keywords: Sovereign CDS spreads; Global financial uncertainty; Dynamic conditional correlation; Domestic factors; Emerging market economies (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:49:y:2025:i:2:s0939362524000992 DOI: 10.1016/j.ecosys.2024.101277 Access Statistics for this article Economic Systems is currently edited by R. Frensch More articles in Economic Systems from Elsevier Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.