IDEAS home Printed from https://ideas.repec.org/a/bxr/bxrceb/2013-174860.html

Sovereign Credit Ratings, The Macroeconomy And Credit Default Swap Spreads

Author

Listed:
  • Yang Liu
  • BRUCE MORLEY

Abstract

ABSTRACT:The aim of this study is to determine the main factors affecting sovereign credit default swap(CDS) spreads, with particular emphasis on the relationship between the credit rating scores andthe CDS spreads. Other macroeconomic affects are also included in the estimation which usespanel data from the main EU countries, USA and Japan. The results indicate there is littleevidence to show any relationship between the credit ratings and the sovereign CDS spreads,and the main drivers of sovereign CDS spreads are macroeconomic fundamentals which reflectthe ‘health’ of the economy.

Suggested Citation

  • Yang Liu & BRUCE MORLEY, 2013. "Sovereign Credit Ratings, The Macroeconomy And Credit Default Swap Spreads," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 56(3-4), pages 335-348.
    • Handle: RePEc:bxr:bxrceb:2013/174860
    Note: Special Issue30th Symposium on Money, Banking and FinanceGuest editors: Christian Aubin, Noëlle Duport andDaniel Goyeau
    as

    Download full text from publisher

    File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/174860/1/ARTICLELIUMORLEY.pdf
    File Function: ARTICLELIUMORLEY
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Barrell, Ray & Choy, Amanda & Holland, Dawn & Riley, Rebecca, 2005. "The Sterling Effective Exchange Rate and Other Measures of UK Competitiveness," National Institute Economic Review, National Institute of Economic and Social Research, vol. 191, pages 54-63, January.
    2. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    3. Bonfim, Diana, 2009. "Credit risk drivers: Evaluating the contribution of firm level information and of macroeconomic dynamics," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 281-299, February.
    4. Beirne, John & Fratzscher, Marcel, 2013. "The pricing of sovereign risk and contagion during the European sovereign debt crisis," Journal of International Money and Finance, Elsevier, vol. 34(C), pages 60-82.
    5. Afonso, António & Furceri, Davide & Gomes, Pedro, 2012. "Sovereign credit ratings and financial markets linkages: Application to European data," Journal of International Money and Finance, Elsevier, vol. 31(3), pages 606-638.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The "bucketing" problem in financial markets
      by noreply@blogger.com (Gulzar Natarajan) in Urbanomics on 2017-06-23 01:54:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mustafa Tevfik KARTAL, 2022. "The Role of Macroeconomic and Market Indicators in Explaining Sovereign Credit Default Swaps (CDS) Spread Changes: Evidence from Türkiye," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 145-164, April.
    2. Şen, Semih & Öz, Ramazan & Serbes, Halil & Tabar, Çağlayan, 2025. "A study of the impact of the relationship between fiscal space and credit default swaps on emerging and developing economies," Finance Research Letters, Elsevier, vol. 86(PF).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anastasios Pappas & Ioannis Kostakis, 2020. "The Driving Factors of EMU Government Bond Yields: The Role of Debt, Liquidity and Fiscal Councils," IJFS, MDPI, vol. 8(3), pages 1-13, September.
    2. Susanna Saroyan & Lilit Popoyan, 2017. "Bank-sovereign ties against interbank market integration: the case of the Italian segment," LEM Papers Series 2017/02, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Graham Bird & Wenti Du & Thomas Willett, 2017. "Behavioral Finance and Efficient Markets: What does the Euro Crisis Tell us?," Open Economies Review, Springer, vol. 28(2), pages 273-295, April.
    4. Eleonora Cutrini & Giorgio Galeazzi, 2017. "External Public Debt, Trade Linkages and Contagion During the Eurozone Crisis," The World Economy, Wiley Blackwell, vol. 40(9), pages 1718-1749, September.
    5. Mardi Dungey & Thomas Flavin & Lisa Sheenan, 2025. "Banks and sovereigns: did adversity bring them closer?," The European Journal of Finance, Taylor & Francis Journals, vol. 31(9), pages 1089-1114, June.
    6. Demoussis, Michael & Drakos, Konstantinos & Giannakopoulos, Nicholas, 2016. "The Impact of Sovereign Ratings on Eurozone SMEs Credit Rationing," MPRA Paper 76364, University Library of Munich, Germany.
    7. Ludwig, Alexander, 2014. "A unified approach to investigate pure and wake-up-call contagion: Evidence from the Eurozone's first financial crisis," Journal of International Money and Finance, Elsevier, vol. 48(PA), pages 125-146.
    8. El-Shagi, Makram & Schweinitz, Gregor von, 2018. "The joint dynamics of sovereign ratings and government bond yields," Journal of Banking & Finance, Elsevier, vol. 97(C), pages 198-218.
    9. Dumitriu, Ramona & Stefanescu, Răzvan, 2020. "Iluzii financiare, Partea întâi [Financial Illusions, Part 1]," MPRA Paper 101201, University Library of Munich, Germany, revised 17 Jun 2020.
    10. Meier, Samira & Rodriguez Gonzalez, Miguel & Kunze, Frederik, 2021. "The global financial crisis, the EMU sovereign debt crisis and international financial regulation: lessons from a systematic literature review," International Review of Law and Economics, Elsevier, vol. 65(C).
    11. Lotfi, Somayyeh & Milidonis, Andreas & Zenios, Stavros A., 2024. "Mispricing of debt expansion in the eurozone sovereign credit market," Journal of Financial Stability, Elsevier, vol. 70(C).
    12. Ludwig, Alexander, 2013. "Sovereign risk contagion in the Eurozone: A time-varying coefficient approach," Dresden Discussion Paper Series in Economics 02/13, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    13. Peppel-Srebrny, Jemima, 2021. "Not all government budget deficits are created equal: Evidence from advanced economies' sovereign bond markets," Journal of International Money and Finance, Elsevier, vol. 118(C).
    14. Ingo G. Bordon & Kai Daniel Schmid & Michael Schmidt, 2014. "Hypnosis Before Wake-up Call? The Revival of Sovereign Credit Risk Perception in the EMU-Crisis," IMK Working Paper 138-2014, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    15. Kizys, Renatas & Paltalidis, Nikos & Vergos, Konstantinos, 2016. "The quest for banking stability in the euro area: The role of government interventions," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 40(C), pages 111-133.
    16. Samir Kadiric, 2022. "The determinants of sovereign risk premiums in the UK and the European government bond market: the impact of Brexit," International Economics and Economic Policy, Springer, vol. 19(2), pages 267-298, May.
    17. Victor Echevarria-Icaza & Simón Sosvilla-Rivero, 2017. "Yields on sovereign debt, fragmentation and monetary policy transmission in the euro area: A GVAR approach," Working Papers del Instituto Complutense de Estudios Internacionales 1703, Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales.
    18. Graham Bird & Wenti Du & Eric Pentecost & Thomas Willett, 2017. "Was it different the second time? An empirical analysis of contagion during the crises in Greece 2009–15," The World Economy, Wiley Blackwell, vol. 40(12), pages 2530-2542, December.
    19. Guillaume Belly & Lukas Boeckelmann & Carlos Mateo Caicedo Graciano & Alberto Di Iorio & Klodiana Istrefi & Vasileios Siakoulis & Arthur Stalla‐Bourdillon, 2023. "Forecasting sovereign risk in the Euro area via machine learning," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(3), pages 657-684, April.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bxr:bxrceb:2013/174860. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Benoit Pauwels (email available below). General contact details of provider: https://edirc.repec.org/data/dulbebe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.