Sovereign risk connectedness: the impact of ECB’s policy announcements in Central and Eastern Europe

C. Ciocirlan () and M. Nițoi
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C. Ciocirlan: National University of Political Studies and Public Administration
M. Nițoi: Romanian Academy

Empirica, 2023, vol. 50, issue 4, No 8, 1025-1054

Abstract: Abstract This paper presents credit risk transmission patterns in Central and Eastern Europe by applying a new mix of methods on sovereign credit default swaps market. The degree of connectedness among sovereigns is examined around the European Central Bank unconventional monetary policy announcements. Although transmission patterns do not substantially change over time, we find that asset purchase programs contributed to spillover reduction in high credit risk networks mostly before the implementation of zero lower bound rate policy. The results suggest that over time unconventional monetary policies substantially decrease credit risk in the European Union, but positive spillover transmission to Central and Eastern Europe depends on markets’ promptness to incorporate information.

Keywords: Sovereign credit risk; Unconventional monetary policy; Network estimation; Central and Eastern Europe; CDS (search for similar items in EconPapers)
JEL-codes: E58 G01 G10 G14 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10663-023-09583-y

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