The Impact of Oil Shocks on Sovereign Default Risk

Sultan Abdulaziz M Alturki and Ann Marie Hibbert

No 9546, Policy Research Working Paper Series from The World Bank

Abstract: The paper examines the impact of oil shocks on sovereign credit default swaps (CDS) for the G10 countries and major oil-exporting countries. The results show that oil demand shocks have a uniformly negative impact on CDS spreads. In contrast, oil supply shocks increase the spreads of the G10 countries, but reduce the spreads of oil-exporting countries. Using quantile regressions, the findings show that oil demand shocks affect spreads across the conditional distribution, while oil supply shocks mostly influence the upper quantiles of spread changes. Furthermore, a two-state Markov-switching modeling confirms a significant non-linearity in the impact of oil shocks.

Keywords: Oil&Gas; Energy and Environment; Energy Demand; Energy and Mining; Financial Sector Policy; Public Finance Decentralization and Poverty Reduction; Public Sector Economics; Financial Crisis Management&Restructuring (search for similar items in EconPapers)
Date: 2021-02-16
New Economics Papers: this item is included in nep-ene, nep-opm and nep-rmg
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:9546

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