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An investigation of oil prices impact on sovereign credit default swaps in Russia and Venezuela

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  • Chuffart, Thomas
  • Hooper, Emma

Abstract

In this paper, we study the impact of oil price returns on sovereign Credit Default Swaps (CDS) spreads for two major oil producers, Russia and Venezuela. Using daily spreads from 2008 to 2015 through a Time Varying Transition Probabilities Markov Switching model, our results show that crude oil price and its volatility are critical determinants of their sovereign debt. We highlight some differences between the two countries, depending on the state of the economy. Moreover, global and local factors play a major role in the determination of sovereign CDS spreads.

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  • Chuffart, Thomas & Hooper, Emma, 2019. "An investigation of oil prices impact on sovereign credit default swaps in Russia and Venezuela," Energy Economics, Elsevier, vol. 80(C), pages 904-916.
    • Handle: RePEc:eee:eneeco:v:80:y:2019:i:c:p:904-916
    DOI: 10.1016/j.eneco.2019.02.003
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    More about this item

    Keywords

    Oil prices; Sovereign Credit Default Swaps; Markov-switching; Time series modeling; Venezuela; Russia;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G1 - Financial Economics - - General Financial Markets
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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