Quality of government institutions and spreads on sovereign credit default swaps

Hsien-Yi Chen and Sheng-Syan Chen

Journal of International Money and Finance, 2018, vol. 87, issue C, 82-95

Abstract: We examine how the quality of government institutions affects the likelihood of sovereign default. We find both economically and statistically significant adverse effects of country governance indicators on sovereign credit default swap spreads. The evidence suggests that better-quality governance enhances a country’s willingness to repay debt, and hence reduces the probability of sovereign default. The results still hold after we account for potential endogeneity and conduct a number of robustness tests.

Keywords: Institutional quality; Sovereign default; Credit risk (search for similar items in EconPapers)
JEL-codes: E02 F34 G15 G23 H63 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261560618302936
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:jimfin:v:87:y:2018:i:c:p:82-95

DOI: 10.1016/j.jimonfin.2018.05.008

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().