The changing international network of sovereign debt and financial institutions

Mardi Dungey, John Harvey () and Vladimir Volkov ()
Additional contact information
John Harvey: Tasmanian School of Business & Economics, University of Tasmania, http://www.utas.edu.au/business-and-economics
Vladimir Volkov: Tasmanian School of Business & Economics, University of Tasmania, http://www.utas.edu.au/profiles/staff/business-and-economics/vladimir-volkov

No 2017-04, Working Papers from University of Tasmania, Tasmanian School of Business and Economics

Abstract: We develop a theoretical and empirical framework for the connections between global financial and sovereign CDS markets. The transmission of shocks is shown to affect the systemic default probability of the international network. The network is found to be "robust but fragile", meaning that a shock can result in the propagation of crises. Between 2003 and 2013, the probability of default in the network in the face of potentially poor investment outcomes and/or sovereign bond haircuts changes sub-stantially. The results suggest that it is the interconnectedness of the financial and sovereign debt markets that provides increased protection against financial fragility.

Keywords: network; sovereign debt; financial institutions; systemic risk; contagion (search for similar items in EconPapers)
JEL-codes: C31 C58 G01 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published by the University of Tasmania. Discussion paper 2017-04

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Related works:
Journal Article: The changing international network of sovereign debt and financial institutions (2019)
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