Nonlinearities in the oil effects on the sovereign credit risk: A self-exciting threshold autoregression approach

Saker Sabkha, Christian de Peretti () and Dorra Hmaied
Additional contact information
Saker Sabkha: CEROS - Centre d'Etudes et de Recherches sur les Organisations et la Stratégie - UPN - Université Paris Nanterre
Christian de Peretti: ECL - École Centrale de Lyon - Université de Lyon, LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon
Dorra Hmaied: IHEC - Institut des hautes études commerciales (Carthage, Tunisie) - UCAR - Université de Carthage (Tunisie)

Post-Print from HAL

Abstract: The unquenchable thirst of several sectors to crude oil in the recent years makes a common belief regarding its key role towards the acceleration of the recent economic recession and financial instability. This paper aims to examine the nonlinear impact of oil shocks on the sovereign credit risk for a sample of 38 worldwide oil-producing and oil-consuming countries, over a period ranging from January 2006 to March 2017. In contrast to the existing literature, CDS volatility is employed as a measure for the creditworthiness level, rather than the commonly used CDS spreads first-order moment. The methodological framework used in this paper goes beyond previous studies and takes into account more financial data features (long memory behavior, asymmetric effects and nonlinearities) according to a self-exciting regime switching model. Results reveal some dissimilarities in the explanatory power of the exogenous variables between regimes and across countries. Particularly, restricted evidences of the impact of oil shocks on sovereign CDS volatility are detected during the stable regime, whilst during the risky regime credit volatility becomes more sensitive to oil market conditions for most of the studied countries. Overall, the decline in oil price worsens the public finances tenability whether the country is oil-related or not.

Date: 2019-12
References: Add references at CitEc
Citations:

Published in Research in International Business and Finance, 2019, 50, pp.106-133. ⟨10.1016/j.ribaf.2019.04.005⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:hal:journl:hal-04875519

DOI: 10.1016/j.ribaf.2019.04.005

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().