Network structure, dynamic evolution and block characteristics of sovereign debt risk: The global evidence

Shan Wu, Yilong Liu, Ziyu Song, Yuqin Zhou and Wenjing Guo

Research in International Business and Finance, 2024, vol. 72, issue PA

Abstract: Global sovereign debt risks are escalating with the tightening of global liquidity. We apply the LASSO-VAR spillover model, network approach and block model to analyze the overall situation and time-varying characteristics of sovereign risk volatility spillover effects among 50 countries. The results show that there is a discernible cyclical pattern in the spillover effect of global sovereign risk volatility, with the spillover intensity progressively rising in each cycle, and more countries have emerged as "net risk exporters" recently. Countries and regions exhibit diverse risk spillover traits, and assume varying roles in the transmission of sovereign debt risks. The originator of a sovereign risk shock isn't necessarily its primary disseminator, underscoring the need to account for systemic significance and risk infectivity. The interlinkages among sovereign debt risk spillover blocks vary over time, given that the composition and attributes of these blocks change. Our findings provide implications for related regulators and investors.

Keywords: Sovereign debt risk spillover; LASSO-VAR; Complex network (search for similar items in EconPapers)
JEL-codes: G10 G15 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:72:y:2024:i:pa:s027553192400285x

DOI: 10.1016/j.ribaf.2024.102492

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