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Sovereign risk and armed conflict: an event-study for colombia

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  • Andrés Castañeda
  • Juan F. Vargas

Abstract

We study the causal effect of recent landmark events of the Colombian armed conflict on the foreign perception of sovereign risk, as measured by the price of the Credit Default Swap (CDS) of Colombian bonds. We construct a Synthetic Control Group to use as the non-conflict counterfactual of the Colombian CDS price and compare its behavior around relevant conflict-event dates with that of the actual (conflict-affected) Colombian CDS. Results suggest that the impact of conflict on the foreign perception of sovereign risk is sizable but rather idiosyncratic, and depends on the political context surrounding each event.

Suggested Citation

  • Andrés Castañeda & Juan F. Vargas, 2012. "Sovereign risk and armed conflict: an event-study for colombia," Defence and Peace Economics, Taylor & Francis Journals, vol. 23(2), pages 185-201, April.
  • Handle: RePEc:taf:defpea:v:23:y:2012:i:2:p:185-201
    DOI: 10.1080/10242694.2011.597233
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    Cited by:

    1. Fırat Bilgel & Burhan Can Karahasan, 2016. "Thirty Years of Conflict and Economic Growth in Turkey: A Synthetic Control Approach," LEQS – LSE 'Europe in Question' Discussion Paper Series 112, European Institute, LSE.
    2. Alvaro J. Riascos & Juan F. Vargas, 2011. "Violence and growth in Colombia: A review of the quantitative literature," Economics of Peace and Security Journal, EPS Publishing, vol. 6(2), pages 15-20, July.
    3. Dennis Essers & Stefaan Ide, 2017. "The IMF and precautionary lending : An empirical evaluation of the selectivity and effectiveness of the flexible credit line," Working Paper Research 323, National Bank of Belgium.
    4. Dennis Essers & Stefaan Ide, 2017. "The IMF and precautionary lending : An empirical evaluation of the selectivity and effectiveness of the flexible credit line," Working Paper Research 323, National Bank of Belgium.

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