IDEAS home Printed from https://ideas.repec.org/a/taf/apeclt/v33y2026i9p1414-1420.html

What drives the dynamic relationship between sovereign credit default swaps and exchange rates?

Author

Listed:
  • Min Su
  • Yixuan Ren
  • Aseel Al-Qasos

Abstract

This study employs an ARMA-cDCC-FIGARCH model to examine the dynamic correlation between sovereign debt default risk and exchange rates. The findings indicate that a country’s level of financial deepening, trade dependency, and market risk accelerates the spillover of sovereign risk onto exchange rate fluctuations. Conversely, the influence of high debt ratios on this dynamic correlation diminishes over time. Additionally, foreign exchange reserves mitigate this type of spillover, and the impact of macro-financial factors exhibits heterogeneity at different quantiles. These insights offer valuable implications for managing and addressing international financial risks.

Suggested Citation

  • Min Su & Yixuan Ren & Aseel Al-Qasos, 2026. "What drives the dynamic relationship between sovereign credit default swaps and exchange rates?," Applied Economics Letters, Taylor & Francis Journals, vol. 33(9), pages 1414-1420, May.
    • Handle: RePEc:taf:apeclt:v:33:y:2026:i:9:p:1414-1420
    DOI: 10.1080/13504851.2024.2428430
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/13504851.2024.2428430
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13504851.2024.2428430?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    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:taf:apeclt:v:33:y:2026:i:9:p:1414-1420. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEL20 .

    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.