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Spatial analysis of sovereign risks: The case of emerging markets

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  • Huyugüzel Kışla, Gül
  • Özlem Önder, A.

Abstract

This paper examines the macroeconomic determinants of the sovereign risks for emerging markets by taking spatial linkages into consideration. We employ spatial panel models for 20 emerging markets for this purpose. Using quarterly data for the period 2004–2015, our results show that there is a strong spatial linkage between the emerging markets. The most important linkage is found to be the trade channel for the sovereign credit default swaps (CDS) spreads. Financial linkages are also important channels in transmitting the sovereign risk. Inflation rate and growth rates are found to be two important indicators of sovereign risk together with other macroeconomic variables. Our results reveal further indirect effects of macroeconomic variables for these countries.

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  • Huyugüzel Kışla, Gül & Özlem Önder, A., 2018. "Spatial analysis of sovereign risks: The case of emerging markets," Finance Research Letters, Elsevier, vol. 26(C), pages 47-55.
    • Handle: RePEc:eee:finlet:v:26:y:2018:i:c:p:47-55
    DOI: 10.1016/j.frl.2017.12.004
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    2. Liu, Peipei & Huang, Wei-Qiang, 2022. "Modelling international sovereign risk information spillovers: A multilayer network approach," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).

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    More about this item

    Keywords

    Sovereign CDS spreads; Sovereign risk; Spatial econometrics; Emerging markets;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F30 - International Economics - - International Finance - - - General

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