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Spillover among Sovereign Credit Risk and the Role of Climate Uncertainty

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  • Naifar, Nader

Abstract

This study investigates sovereign credit risk spillovers in G20 nations, emphasizing the impact of global climate policy uncertainty. This study analyzes the dynamics of these spillovers using sovereign credit default swap (SCDS) spreads and the time-varying parameter vector autoregressive approach. The study finds that Indonesia and Mexico are key risk transmitters within the G20. Linear and quantile regressions show an inverse relationship between climate uncertainty and SCDS spillovers, particularly affecting highly integrated G20 countries. These results highlight the need for coordinated and transparent climate policies to ensure financial stability among G20 nations.

Suggested Citation

  • Naifar, Nader, 2024. "Spillover among Sovereign Credit Risk and the Role of Climate Uncertainty," Finance Research Letters, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:finlet:v:61:y:2024:i:c:s1544612323013077
    DOI: 10.1016/j.frl.2023.104935
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    More about this item

    Keywords

    Sovereign credit risk; Credit default swap; Joint connectedness approach; Climate Uncertainty;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G1 - Financial Economics - - General Financial Markets

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