The effect of economic and political uncertainty on sovereign CDS spreads

Pan, Wei-Fong1; Wang, Xinjie2; Xiao, Yaqing3; Xu, Weike4; Zhang, Jinfan5

2024

10.1016/j.iref.2023.07.110

INTERNATIONAL REVIEW OF ECONOMICS & FINANCE   影响因子和分区

1059-0560

1873-8036

This study examines the effect of economic and political uncertainty on sovereign CDS spreads using a novel panel index of world uncertainty. We document that sovereign CDS spreads widen with uncertainty. A 1% increase in uncertainty leads to a 0.86% increase in sovereign CDS spreads. Furthermore, the effect of uncertainty on sovereign CDS spreads is stronger for developed countries, countries with investment-grade credit ratings, and during non-crisis periods. The banking sector is a potential channel through which uncertainty increases sovereign risk. Overall, our results suggest that economic and political uncertainty contributes to both local and global components of sovereign CDS spreads.

Sovereign CDS spread Political uncertainty Economic uncertainty

SSCI

英语

通讯

Business & Economics

Business, Finance ; Economics

WOS:001053533800001

ELSEVIER

2-s2.0-85171661588

Web of Science

1.Sun Yat Sen Univ, Business Sch, Guangzhou, Peoples R China
2.Southern Univ Sci & Technol, Shenzhen, Peoples R China
3.Capital Univ Econ & Business, Beijing, Peoples R China
4.Clemson Univ, Clemson, SC USA
5.Chinese Univ Hong Kong, Shenzhen, Peoples R China

Pan, Wei-Fong,Wang, Xinjie,Xiao, Yaqing,et al. The effect of economic and political uncertainty on sovereign CDS spreads[J]. INTERNATIONAL REVIEW OF ECONOMICS & FINANCE,2024,89:143-155.

Pan, Wei-Fong,Wang, Xinjie,Xiao, Yaqing,Xu, Weike,&Zhang, Jinfan.(2024).The effect of economic and political uncertainty on sovereign CDS spreads.INTERNATIONAL REVIEW OF ECONOMICS & FINANCE,89,143-155.

Pan, Wei-Fong,et al."The effect of economic and political uncertainty on sovereign CDS spreads".INTERNATIONAL REVIEW OF ECONOMICS & FINANCE 89(2024):143-155.