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Re-examining the Impact of Oil Price Uncertainty on Sovereign CDS Spread of GCC Countries - Accounting for the Asymmetry and Outliers

Author

Listed:
  • Aktham Maghyereh
  • Abdel Razzaq Al Rababa'a
  • Salem Adel Ziadat

    (Department of Accounting & Finance, United Arab Emirates University, United Arab Emirates)

Abstract

We examine the effect of oil price uncertainty on sovereign credit risks in Gulf Cooperation Council (GCC) countries. Unlike past studies, we employ a structural vector autoregression with multivariate GARCH-in-mean (VAR-GARCH-in-mean) approach after filtering out outliers in the observed series. The findings show that uncertainty in the oil market has a positive impact on the sovereign Credit Default Swap (CDS) spreads of the GCC countries. Furthermore, we find that GCC sovereign CDS spreads react asymmetrically to positive and negative oil price shocks.

Suggested Citation

  • Aktham Maghyereh & Abdel Razzaq Al Rababa'a & Salem Adel Ziadat, 2024. "Re-examining the Impact of Oil Price Uncertainty on Sovereign CDS Spread of GCC Countries - Accounting for the Asymmetry and Outliers," Energy RESEARCH LETTERS, Asia-Pacific Applied Economics Association, vol. 5(1), pages 1-6.
    • Handle: RePEc:ayb:jrnerl:96
    DOI: 2024/07/10
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    References listed on IDEAS

    as
    1. Yildirim, Zekeriya & Arifli, Arif, 2021. "Oil price shocks, exchange rate and macroeconomic fluctuations in a small oil-exporting economy," Energy, Elsevier, vol. 219(C).
    2. Amélie Charles & Chew Lian Chua & Olivier Darné & Sandy Suardi, 2020. "On the pernicious effects of oil price uncertainty on US real economic activities," Empirical Economics, Springer, vol. 59(6), pages 2689-2715, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Sovereign credit risk; Oil price uncertainty; VAR-GARCH-in-mean; GCC countries;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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