Linkages between Financial Sector CDS Spreads and Macroeconomic Influence in a Nonlinear Setting
Shawkat Hammoudeh and
Rangan Gupta ()
No 201456, Working Papers from University of Pretoria, Department of Economics
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 including the world financial crisis. We employ the nonlinear ARDL model (NARDL) to account for the shortand long-run asymmetries in the sensitivity of 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 sreads These findings are important for policy-makers who deal credit risks at sector levels.
Keywords: Sector CDS; Financial crisis; Asymmetric adjustments; NARDL model (search for similar items in EconPapers)
JEL-codes: C32 F65 G01 (search for similar items in EconPapers)
Pages: 29 pages
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Journal Article: Linkages between financial sector CDS spreads and macroeconomic influence in a nonlinear setting (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201456
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