Long-run relationships between US financial credit markets and risk factors: Evidence from the quantile ARDL approach

Walid Mensi, Syed Jawad Hussain Shahzad, Shawkat Hammoudeh, Besma Hkiri and Khamis Hamed Al Yahyaee

Finance Research Letters, 2019, vol. 29, issue C, 101-110

Abstract: This paper examines the quantile-dependent short- and long-run impact of the FFR, VIX index and crude oil prices on the credit risk of the U.S. banking, financial services and insurance sectors. Using the quantile autoregressive distributed lag model, we find that the federal funds rate and the equity volatility mainly increase the credit risk of the financial sector when the credit risk is on a rising trend. However, oil prices, and to a lesser extent, decrease the credit risk. The short- and long-run impacts of the considered risk factors are time-varying and heterogeneous across the different credit market states.

Keywords: Financial credit sectors; Risk factors; Quantile ARDL model (search for similar items in EconPapers)
JEL-codes: C58 F37 G11 G14 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:29:y:2019:i:c:p:101-110

DOI: 10.1016/j.frl.2019.03.007

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