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Assessing the extent of contagion of sovereign credit risk among BRICS countries

Author

Listed:
  • Lumengo Bonga-Bonga

    (University of Johannesburg)

  • Mathias mandla Manguzvane

    (University of Johannesburg)

Abstract

This paper conducts an ex ante analysis to assess how sovereign credit risk is transmitted among BRICS countries. To this end, the conditional value-at-risk (CoVaR) methodology is used. Moreover, the paper makes use of the generalised forecast error decomposition to assess the contribution of key economic and financial variables of each of the BRICS countries to credit risk transmitted from China, the biggest economy among the BRICS. The findings of this paper show the existence of cross-transmission of credit risk shocks among BRICS countries, with China affecting the most other BRICS countries. However, the channel through which credit risk distress in China is transmitted to the other BRICS countries is not homogenous.

Suggested Citation

  • Lumengo Bonga-Bonga & Mathias mandla Manguzvane, 2020. "Assessing the extent of contagion of sovereign credit risk among BRICS countries," Economics Bulletin, AccessEcon, vol. 40(2), pages 1017-1032.
    • Handle: RePEc:ebl:ecbull:eb-19-00655
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ndiweni, Zinzile Lorna & Bonga-Bonga, Lumengo, 2022. "Contagion or decoupling? Evidence from emerging stock markets," MPRA Paper 115170, University Library of Munich, Germany.
    2. Zulu, Thulani & Manguzvane, Mathias Mandla & Bonga-Bonga, Lumengo, 2023. "Assessing the contribution of South African Insurance Firms to Systemic Risk," MPRA Paper 116815, University Library of Munich, Germany.

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    More about this item

    Keywords

    Sovereign credit risk; conditional value-at-risk; contagion;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • F3 - International Economics - - International Finance

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