Linkages between financial sector CDS spreads and macroeconomic influence in a nonlinear setting

Amine Lahiani (), Shawkat Hammoudeh and Rangan Gupta
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Amine Lahiani: LEO - Laboratoire d'Économie d'Orleans [UMR7322] - UO - Université d'Orléans - UT - Université de Tours - CNRS - Centre National de la Recherche Scientifique
Shawkat Hammoudeh: Drexel University, IPAG Business School

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Abstract: This paper investigates the asymmetric and nonlinear transmission of financial and energy prices to US five-year financial CDS sector index spreads for the banking, financial services and insurance sectors in the short- and long-run over the recent periods revolving around the global financial crisis. We employ the nonlinear ARDL (NARDL) model to account for the short- and long-run asymmetries in the sensitivity of those CDS sector index spreads to their determinants. Our findings suggest that there is evidence of short- and long-run nonlinearities and asymmetries in the adjustment process of the three CDS variables. There are also short- and long-run asymmetries in the influences of macroeconomic and financial variables on the CDS sector spreads. These findings are important for policymakers who deal with credit risks at the sector levels.

Date: 2016-05
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Citations: View citations in EconPapers (23)

Published in International Review of Economics and Finance, 2016, 43, pp.443-456. ⟨10.1016/j.iref.2016.01.007⟩

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Related works:
Journal Article: Linkages between financial sector CDS spreads and macroeconomic influence in a nonlinear setting (2016)
Working Paper: Linkages between Financial Sector CDS Spreads and Macroeconomic Influence in a Nonlinear Setting (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03531142

DOI: 10.1016/j.iref.2016.01.007

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